Annual Report
2015/16
At the heart of power electronics

LEM | Annual Report 2015/16

1

Traction: point machine
In the earliest times, simple levers operated railway points manually. Gradually
the points came to be operated by centralized levers in stations (4). The pointswitches being further away from thestations, they could not anymore be
operated mechanically. Therefore, point
machines have been introduced.
Modern point machines (2) have an electric motor and gears
to convert the rotating motion of the motor into the linear
motion required to switch the points. The machine performs
the following functions: moving switch blades (1), locking theblades, detection and proving the position of blades.

PCM 10-P

The current of the electric motor of the point machine (2) ismeasured by a transducer (PCM 10-P) (A) and monitored.
Any variation from the normal current waveform indicates an
early warning of equipment failure that will require preventive
maintenance.

4
3

3

2
A

A
1
2
3
4

PCM 10-P
Switch blade
Point machine
Trackside control cabinet
Control room / station

LEM | Annual Report 2015/16

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1

Table of Contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

LEM at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6Business Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

LEM's Core Values....................................

14

Corporate Governance Report . . . . . . . . . . . . . . . . . . . . . . . .

15

Compensation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

LEM Group
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . 33

LEM Holding SA
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Information for Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

72

Group Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

74

Reporting period 1 April 2015 to 31 March 2016

LEM | Annual Report 2015/16

3

LEM | Annual Report 2015/16

4Foreword
Dear Shareholders,
The weak levels of global trade and manufacturing activity along with the strong Swiss franc were the main sources ofour external challenges during the last year. The consolidated result, however, proves that LEM is capable of maintaining
strong margins even under adverse conditions. Overall, we not only delivered a solid result in the financial year 2015/16,
but also continued to take the necessary measures to prepare our future. We kept strengthening LEM by thoroughly
implementing our long-term strategy with a focus on market oriented innovation, cost efficiency, and flexibility.
Diverse market trends
After a soft start, activity normalized during the course of the year. We benefitted from the diversity of our target markets
and our geographical footprint. China remained our most important country and continued to grow across all businesses.
We recorded our strongest growth in the green cars and the renewable energies businesses. At the same time, thedrives & welding and traction businesses were affected by subdued global demand and slow industrial investment. We
consolidated our market share in the Industry businesses and secured new platforms with current as well as new customers in both Automotive businesses.
Strategy milestones
We made important progress in our strategy execution. During the year under review, we launched eight innovative products and ramped up the production of recently launched products. The share of production from our cost-competitivesites in Beijing and Sofia accounted for 75% of the global output. Demand in the Automotive and renewable energies
businesses surged and we managed this growth maintaining a high delivery performance. Furthermore, we completed
the introduction of our new Enterprise-Resource-Planning (ERP) system, which will form the basis for future cost-efficiency
measures.
Building on our strong foothold in our core markets, we want to further develop our competitive position and to address
new growth opportunities. On 1 January 2016, we strengthened our leadership with a new management structure. The
new Executive Management team composed by François Gabella (CEO), Andrea Borla (CFO), Frank Rehfeld (General
Manager Industry), and Rainer Bos (General Manager Automotive) will focus on the execution of strategic initiatives intheir segments, allowing the CEO to concentrate more on the long-term growth of LEM.
Solid profitability
Sales reached CHF 261.5 million, representing a growth of 1.4%. The Automotive segment contributed to this growth,
while sales in the Industry segment remained below last year's level. At constant exchange rates, Group sales increasedby 3.6%. EBIT came to CHF 52.9 million, compared with CHF 54.2 million in the previous year. We managed to maintainour EBIT margin above the 15% to 20% target range despite a negative impact from foreign exchange developments
totaling CHF 3.2 million. Net profit for the reporting year amounted to CHF 43.5 million, even surpassing last year's profitof CHF 43.1 million.
Dividend proposal to the ordinary General Meeting of Shareholders
The dividend of CHF 35 that the Board of Directors will propose to the forthcoming ordinary General Meeting of Shareholders is a sign of trust in the company's ability to continue generating strong cash flows in the future. The proposal follows
LEM's dividend policy of distributing significantly more than 50% of its consolidated net profit to shareholders and cor­
responds to a payout ratio of 91.7%.
ThanksThis year's challenging business environment called for major efforts. We would like to thank all our employees for theircommitment and hard work. Our thanks also go to our customers for their trust as well as to our shareholders for theirlong-term investment in LEM.

Andreas Hürlimann
Chairman of the Board of Directors

François Gabella
Chief Executive Officer

LEM | Annual Report 2015/16

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LEM at a Glance
LEM – At the heart of power electronics
LEM is a focused manufacturer and a global market leader. Its core products, transducers for measuring electrical parameters like current and voltage, are used in a broad range of applications. Although these devices are not visible to theoutside world, they are vital for application functionality and the benefits provided to the end users. Starting with products
for locomotives in the seventies, LEM expanded into a vast area of industrial applications, including variable speed drives
for motors and power supplies for industrial applications. Today, LEM's current and voltage transducers are also used in
AC/DC converters, uninterrupted power supply systems for computers as well as in new innovative energy applications
like microturbines and wind and solar power generation. Additional opportunities have been developed in the Automotive
market, such as battery management and start/stop applications for conventional cars and electrical motor controls,
battery pack management and embedded chargers for green cars. This evolution underscores the Company's exceptional skills in adapting to rapidly changing industrial trends, such as miniaturization, higher performance levels and agreater degree of application, integration and complexity.
LEM has the strongest brand recognition in its markets. Its products – commonly called "LEMs" – are at the heart of many
power electronics applications. LEM's strategy is to increase its technology leadership, efficiency and production flexibility. At the same time, LEM is committed to maintaining customer focus and operational excellence by running cost-effective and service-oriented production platforms. Profitable growth is a key objective.
Worldwide presence
LEM is a global organization with production plants in Beijing (China), Geneva (Switzerland), Tokyo (Japan) and in Sofia(Bulgaria). The Company has sales offices close to its main clients' locations and offers seamless service around the globe.

LEM Holding SA, Fribourg,
Switzerland
Production Centers (PDCs)
Beijing, China
Geneva, Switzerland
Tokyo, Japan
Sofia, Bulgaria
Adaptation Centers
Milwaukee, USA
Tver, Russia

Sales Offices
Geneva, Switzerland
Frankfurt, Germany
Vienna, Austria
Brussels, Belgium
Kgs. Lyngby, Denmark
Paris, France
Padova, Italy
Skelmersdale, UK
Tver, Russia
Beijing, Shanghai, Shenzhen, Xian, Hefei, China
Tokyo, Japan
Pune, India
Seoul, South Korea
Milwaukee, Columbus, Amherst,
Los Angeles, USA
Agents/Distributors

LEM | Annual Report 2015/16

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Key figures 2011/12 to 2015/16
In CHF millions, %2011/122012/131

2013/142014/15

2015/16

Orders received
Book-to-bill ratio
Sales

182.9
0.77
236.3

230.6
0.98
235.0

246.4
1.00
245.6

251.0
0.97
257.8

256.5
0.98
261.5

Gross profit
In % of sales
Operational EBIT
In % of sales

96.5
40.8%
34.2
14.5%

98.6
41.9%
40.8
17.4%

115.4
47.0%
55.7
22.7%

118.4
45.9%
54.2
21.0%

120.4
46.0%
52.9
20.2%

Net profit for the year
EPS basic (CHF)
Dividend per share (CHF)

28.5
25.11
25.00

32.4
28.48
30.00

45.6
40.09
40.00

43.1
37.86
40.00

43.5
38.18
35.00 2

Operating cash flow
Investing cash flow

46.7
– 9.1

46.2
– 10.4

40.6
– 8.7

50.2
– 9.7

45.6
– 6.6

In CHF millions, %31.3.1231.3.13 1

31.3.1431.3.15

31.3.16

Net financial assets/(liabilities)
Shareholders' equity
Equity ratio (in % of assets)

18.1
79.6
60.0%

27.6
84.0
61.9%

24.6
94.2
65.1%

20.9
91.9
65.0%

13.6
85.9
61.3%

Market capitalization
Employees (in FTEs)

563.7
1'136

671.5
1'137

801.4
1'241

910.3
1'274

929.1
1'388

1
2

Restatement following IAS19R application (pensions).
Proposal of the Board of Directors to the ordinary General Meeting of Shareholders on 30 June 2016

Sales per segment

Regional sales breakdown

In CHF millions

In CHF millions

300

300

250

250

150

215.2

208.3
200.0

211.1

91.3

103.2

117.5

125.5

46.5

45.1

42.7

44.6

12/13

13/14

14/15

15/16

110.0

98.1

84.3

90.4

42.1
11/12

97.4

150

221.0
100

100

50

50
0

97.5

200

200

28.0

35.0

34.6

36.7

11/12

12/13

13/14

14/15

Industry segment
Automotive segment

46.3
0
15/16

EuropeAsia and rest of world
North America

LEM | Annual Report 2015/16

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Green cars: hybrid-electric vehicles/
electric vehicles
Automotive hybrid technology became
widespread in the late 1990s. Today,
about 20 years later, the electrificationand hybridization of automobiles is taking up significant speed.
LEM supports this mega-trend with best-in-class transducers
measuring current in battery management systems and electricmotor controls that enhance the effective operation of thesesystems.

DHAB V2

Battery management:
The battery management system (BMS) adjusts the charging
process through the combustion engine in a hybrid electricvehicle or gives the information to the driver for external charging of the high-voltage battery (1) in an electric vehicle. LEM
current sensors (CAB (D), DHAB (B)) provide all necessary current information at high accuracy level to the BMS to improvethe efficiency of the charging process.

HAH3

Motor control:
The motor control (3) takes power from the batteries and delivers it to the electric motor (4). The accelerator pedal provides
the signal that tells the controller how much power it is supposed to deliver. LEM current sensors for motor drives (HAH3

HSN(A), HSN (C)) are integrated in the inverter modules (5) and provide current signals at very high speed in order to assure asmooth and jerk-free acceleration.

D

CAB500

1

B

2

A

D

3
1

C

4

2
C

A

3
4

A
5
A
B
C
D

LEM | Annual Report 2015/16

8

HAH3
DHAB V2HSN
CAB5005

High-voltage battery
Charger
Motor controller
Electric motor andtransaxle
DC/DC converter

Business Report
Net profit increased from CHF 43.1 million in the previous year to CHF 43.5 million in the reporting year, despite challenging foreign exchange and market conditions. Chinese markets continued to support sales growth across all businesses.
We clearly benefitted there from our leading market position based on local production and distribution capabilities. The
strongest momentum was provided by the green cars business, where we were able to reap the rewards of investments
initiated few years ago, and the renewable energies business, where we benefitted from our superior product range andglobal growth of renewable energies capacities. The ongoing high pace of product launches as well as the increased
production capacity at our cost-competitive sites helped us to maintain the operating margin above our 15% to 20% target range.
Financial result
Sales in the financial year 2015/16 totaled CHF 261.5 million, an increase of 1.4% compared with the previous year. At
constant exchange rates, Group sales increased by 3.6%.
Key figures
In CHF millions

Orders received
Sales
Book-to-bill
EBIT
Net profit

Financial year
2014/15

Q1
2015/16

Q2
2015/16

Q3
2015/16

251.0
257.8
0.97
54.2
43.1

60.9
61.5
0.99
10.5
8.9

66.0
70.0
0.94
14.4
10.9

67.3
67.2
1.00
15.8
11.7

Q4 Financial year
2015/162015/16

62.3
62.7
0.99
12.3
12.0

256.5
261.5
0.98
52.9
43.5

China represented 31% (26% in 2014/15), Asia excluding China 15% (18% in 2014/15), Europe 35% (38% in 2014/15), andNorth America 17% (17% in 2014/15) of Group sales. Sales growth continued in China (+21%) and was robust in North
America (+4%), but was weak in Europe (– 6%) and Asia excluding China (– 12%). Excluding foreign exchange fluctuations,sales were stable in both Europe and North America.
In the financial year 2015/16, our gross margin remained stable at 46.0% (45.9% in the previous year) thanks to the transfer
of production to cost-competitive production sites, our focus on sourcing, and lower commodity prices.
Sales, general and administrative spending (SG&A) increased from CHF 48.8 million to CHF 52.9 million as a result of recruitments in Sofia and Beijing as well as one-off cost arising from the introduction of our new ERP system and organizationalchanges in the first half of 2015/16. SG&A normalized in the second half year. During the financial year 2015/16, SG&A represented 20.2% of sales, compared with 19.0% in the previous reporting period. Research and development expense (R&D)
as a percentage of sales remained at the long-term average at 5.6%.
Foreign exchange fluctuations in the financial year 2015/16 hit our EBIT margin in the amount of CHF 3.2 million. EBIT for
the full financial year 2015/16 only declined by CHF 1.3 million from CHF 54.2 million to CHF 52.9 million. Our EBIT margin
for the financial year 2015/16 came in at 20.2%, down from 21.0% in the previous year, but still above our EBIT margin target of 15% to 20%. Nevertheless, we posted a net profit for the year of CHF 43.5 million, an improvement of CHF 0.4 million
compared with last year.
Our balance sheet remains strong. As at 31 March 2016, total assets had decreased to CHF 140.2 million. Shareholders'equity reached CHF 85.9 million, representing an equity ratio of 61.3% (65.0% as at 31 March 2015).
Cash flow from operating activities in the financial year was CHF 45.6 million (– 9.3%) and free cash flow was CHF 39.0 million (– 3.8%). We achieved this result thanks to our efforts in bringing accounts receivables back to normal levels. As areminder, accounts receivables were unusually high on 30 September 2015 (half-year results 2015/16) due to invoicing andcollection delays caused by the introduction of our new ERP system.
Industry segment
Sales in the Industry segment decreased by 2.7% to CHF 215.2 million in the financial year 2015/16. At constant exchange
rates, sales increased by 0.3%. Sales in China were up by 15%, with a positive contribution across all businesses. China
has thus expanded its position as our most important single country and now accounts for 31% of Industry sales. Sales
performance in the other regions was weak, with Asia excluding China posting a sales decrease of 17% and sales in Europe
and North America decreasing by 7% and 3%, respectively. Asia was the most important region, accounting for 46% ofIndustry sales, followed by Europe with 41% and North America with 11%. The EBIT margin came in at 20.0% comparedwith 22.6% in the previous financial year.
Our production volumes remained at a high level. We recorded good success with recently launched products, mainly forthe renewable energies business, and increased production capacities accordingly.
LEM | Annual Report 2015/16

9

Our new products enhanced our competitiveness and supported our margins. We won market share in China, while keeping it stable in the other regions. No major changes in our competitive environment were observed.
In 2015, global economic activity remained subdued. We observed soft industrial investment globally and saw hardly any
new manufacturing capacities being created by our customers. The sharp price drop for energy and other commodities led
to lower activity in oil and gas extraction and lower demand from oil exporters. On a positive note, we observed increasing
interest in the infrastructure for electric cars and smart grid applications. In China, despite headlines suggesting slowing
growth, we still benefitted from robust demand in the area of automation as well as high installation rates for new solar andwind capacities.
Sales in the drives & welding business slowed by 6% over the previous year. China maintains its position as Asia's manufacturing hub and as a result sales to China increased while sales to the rest of Asia slowed. The other regions were weak:
the ongoing economic uncertainty affected industrial investment activity in Europe and North America.
We increased our market share in the renewable energies & power supplies business and benefitted from consistently highlevels of investment in new solar and wind capacities, especially in China and the US, and in battery technology in South
Korea. Sales in Japan declined after government subsidies expired. Smart grid projects picked up. Our sales increased by
5%.
Sales in the traction business decreased by 8%. Strong activity was observed in China and India for both domestic andexport markets, but there were fewer new traction projects in Europe. Activity in high-speed trains was stable, while there
was some growth in light rail.
In the project-driven high-precision business, sales increased by 8%. The greatest activity was recorded in China, India,
and Japan. Test & measurement markets developed positively and medical markets were stable. HVDC business remained
at a high level.
In the financial year 2016/17 we aim to strengthen our market position in all businesses taking advantage of our pipeline ofinnovative products for our current markets. We also want to develop new products for new markets and applications suchas circuit breakers for smart grids.
Automotive segment
Sales in the Automotive segment reached CHF 46.3 million in the financial year 2015/16, representing an increase of
26.1% on the financial year 2014/15. At constant exchange rates, sales grew by 23.6%. We recorded strong growth in
all regions, especially in the US (+14%), China (+55%), Japan (+13%), and Germany (+33%). For the first time in the
Automotive segment, Asia is the most important region, representing 47% of segment sales. Sales in China alone
accounted for 31% of segment sales. North America is our second-largest region with 44%, while segment sales in
Europe stood at 8%. EBIT reached CHF 9.9 million, up 129.9% on the financial year 2014/15. The EBIT margin was
21.4%, compared with 11.8% one year ago. The margin increase resulted from volume growth, the currency situation,
and a favorable product mix.
We managed the sharp volume increase maintaining a high delivery performance at the highest LEM quality standards.
Several customers granted us awards for our delivery reliability and product quality.
The global automotive industry continued to grow in 2015 and reached a new production record. Vehicle production
increased by 1.1% to 90.8 million (source: OICA). The US, China, and Europe contributed to the growth, while productionin Japan decreased. Electrification of cars has become the dominant trend, with connectivity and safety also being key
focus areas. Start/stop applications are becoming a standard feature in conventional cars. In the sensing market, we areobserving increased competition from Chinese low-cost manufacturers and integrators.
Year-on-year sales in the conventional cars business grew by 11%. We benefitted from the growth in the global car industry and won new projects and platforms to support future growth. We recorded continued success with recently launched
products for battery-monitoring applications.
Sales in the green cars business jumped by 90%. This strong performance is built on market share gains. We won new
projects with Chinese car manufacturers where government support for green cars provided extra support. Increasing
interest in 48 V applications for mild hybrid-electric vehicles is being observed, a market for which LEM already has good
products.
We expect continued growth, mainly in the green cars business, and intend to increase production capacity to meet the
global demand. At the same time, we will adjust our organization and R&D capacity to the current pace of growth. We
will continue to launch new products.

LEM | Annual Report 2015/16

10Strategy implementation
Effective execution of our strategic initiatives proved successful in the reporting year. It helped us to maintain our competitive edge, as demonstrated by our high market share and strong margins. Our markets experience rapid shifts andthe economic framework changes constantly. Anticipating such challenges and finding the best answers is key forlong-term success.
– – Increase our technology leadership

We are continuing to renew our product portfolio. Miniaturization and standardization are the main trends in productdevelopment. We increasingly develop products using new technologies in order to tap new markets. We consider new
sensing technologies, which will be integrated into our new products. For the next product generation, we will focus ona technology core block that allows us to better meet market requirements such as faster time to market, cost reductions and late customization.
We launched six new products in the Industry segment and two new products in the Automotive segment. Ten newpatents were secured. The new LF 2010 uses our proprietary ASIC for closed loop Hall Effect technology and delivers
a performance that matches the more complex Fluxgate technology while bringing new features. The product is designed
for drives, renewable energy, and traction applications. The two new products in the HO family (HOY, HOYA) provide
high-precision measurement for currents from 600 A to 1200 A in a very compact casing. Both variations are a customerspecific design for drives applications. The new ART is the flagship product for smart grid applications using a Rogovski coil for 1000 V isolation. It houses a very thin coil and allows flexible mounting. ART provides high-precision measurement within the entire coil. The new ATOs (ATO L 10, ATO L 16) are split core transducers with 600 V isolation. The
ATO transducers can be retrofitted to energy meters in power distribution and smart grid applications. The new HSN
current transducer with integrated busbar is designed for electric and hybrid-electric vehicles and measures currents
of up to 1000 A. Thanks to its reduced sensor size, it allows compact system design. The new HAM300 is a high-frequency transducer with a compact design and high temperature stability, features that are particularly important ininverters for fuel cell cars.
– – Increase our efficiency of operations

We are maintaining our focus on cost management in production by improving supplier performance, implementing
internal efficiency programs, and transferring production to China and Bulgaria. The site in Bulgaria is developing according to plan. Production increased in 2015/16 to 9.3% of global output (4.1% in 2014/15). During the reporting year, weincreased the share of cost-competitive production to 75% of global output, a new record at LEM. We see potential forincreasing cost efficiency in the expansion of the Eastern European supplier base for our Bulgarian site and the increaseof automation in specific processes in China. We completed the introduction of the new ERP system, which will form
the basis for future cost efficiency improvements.
– – Increase our production flexibility

We successfully managed the sharp increase in demand for green cars and renewable energies products. Our customers were able to rely on a timely product supply in the required volume and in the proven LEM quality. At the sametime, we ramped up the production of new products and added capacity for successful products. We increased supply chain and industrial engineering competencies in Sofia, which will enable the plant to run more autonomously.
The increased local sourcing in Eastern Europe added to the flexibility of our production site in Sofia.
Quality management
A key priority of ours is to continuously improve the quality of our products and services. We maintain the same high quality standards for all production sites. We follow ISO standards depending on the market supplied: ISO9001 for Industry,
ISO/TS16947 for Automotive, and IRIS for traction. Our laboratories are ISO17025 certified for test and calibration. In
2015, we started to review the process organization to be prepared for the introduction of ISO9001:2015 from 2018.

LEM | Annual Report 2015/16

11

Responsibility
We strictly apply our Code of Conduct to all our employees and business partners. We trained our new employees andasked for the commitment of our suppliers. We have been embracing the ten principles of the United Nations Global
Compact (UNGC) since 2006. Like every year, we provided an update on our progress and made it available on our website (www.lem.com > About LEM > LEM Code of Conduct). A zero-tolerance policy is applied to fraud and bribery.
All our production sites are ISO 14001:2004 certified, an environmental certification which we renew annually. Our production activities are compliant with REACH (European Regulation for Registration, Evaluation, Authorization and Restrictionof Chemicals), RoHS (Restriction of Hazardous Substances), and conflict minerals reporting and obligations.
Last year, we started a project to further reduce electricity consumption by 20%. As a first step, we have deployed a smart
grid architecture solution to map our current electricity consumption.
Employees
Number of employees at the end of the financial year (FTE)

Permanent employees
Temporary employees
Apprentices
Total

31.3.201631.3.2015

1'253
121
13
1'388

1'182
81
12
1'274

56% of employees at Group level are women. The highest percentage of women is in production (75%). We encourage
female candidacies in order to increase their share in the higher-qualification positions.
In the annual evaluation process, we assess employee motivation and satisfaction. Work climate and team, job content,
and work-life balance remain the most important motivators. Four out of five employees rate their satisfaction level inthese three criteria as good or very good.
Employee and customer survey
Every second year LEM performs a worldwide employee and customer survey. The next survey is scheduled for 2016.
The results of the latest survey can be found in the annual report 2014/15 (page 12).
Outlook
We assume a stable economic situation in our important markets. As a consequence, we expect steady sales in mostmarkets with the exception of China where growth is forecasted to continue, though at a slower pace. The main growth
drivers for LEM are expected to be the renewable energies businesses as well as the green cars business. The unstablecurrency environment will remain a challenge for us and underlines the importance of adapting the global footprint of all
our activities. We confirm our 15% to 20% EBIT margin target range.

LEM | Annual Report 2015/16

12

High precision: magnetic resonanceimaging
Magnetic resonance imaging (MRI) is a
medical imaging technique to image theanatomy and the physiological processesof the body. MRI scanners use strong
magnetic fields, radio waves, and field
gradients to form images of the body.
The specific magnetic field is generated by 3 gradient amplifiers(x,y,z) (4) that enhance the current to supply the gradient coils (1).
The coils create a precise magnetic field that will need to varydepending on the location. The 3 coils are perpendicular to eachother in order to represent a 3 D image.

ITL 900-T

One LEM ITL 900 transducer (A) is used in each gradient amplifier to measure very accurately the electrical current flowing
through the gradient coils, which generate the magnetic field.
The accuracy of the current measurement directly influences thequality of the image.

2

1

6

7
A

2

4
3
5

8

A
1
2
3
4
5
6
7
8

ITL 900-T
Gradient coils
Magnet & shim
Generator
Gradient amplifier
Shim control
Radio frequency coil
Radio frequency amplifier
CPU & display
LEM | Annual Report 2015/16

13

LEM's Core Values
It is vital for all of LEM to share common values and working principles. All employees understand what LEM wants toachieve so that everyone works together for the same purpose.
These values link all LEM employees together and make us a team. They are the common beliefs we share. They are thespirit and intent of everything we do at LEM.
There are six core values, each one guiding us throughout all our activities.
– – We are customer driven– – We operate with integrity– – We value teamwork– – We commit– – We strive for excellence– – We lead innovation
We are customer driven
We succeed by exceeding our customer expectations with a "yes customer" attitude. All our activities are driven by thedesire to provide best quality service to our customers. We aim to listen to, anticipate and respond to our customers'
needs. For this reason, we collaborate closely with our customers and form true relationships. We target "customer
delight".
We operate with integrity
Basic ethical behavior and integrity in business relationships determine the essence of all our actions. As a Company andas individuals, we do the right things right and never compromise our values and principles. We honor our agreements
and are honest in our communications.
Our relationships with co-workers, customers, suppliers, partners and the investor community are based on openness
and fairness.
We value teamwork
LEM forms a worldwide community. Close collaboration and networking across functions, departments and cultures iscritical for the success of the Company. To cooperate, we need to be open and honest and willing to share and trust eachother. Accountability is a key factor to our success. We are committed to a workplace where individuals are treated fairly
and with respect, where all employees have the opportunity to expand their skill, and accomplishments are recognized.
Teamwork is more than just working together, it is bringing out the best of everyone's strengths.
We commit
We set our goals high because we know we can reach them. We honor these goals as promises to our customers, ourshareholders and ourselves. Our continued success depends on keeping our promises and taking responsibility for all
our actions. Success is measured by the results we produce in customer satisfaction, sales, profitability, value creation
to our shareholders and the scope of opportunities we provide for our employees.
We strive for excellence
No matter how good our products, services, processes and results, we are dedicated to making them better. We aim forthe highest standards of quality for our customers. By approaching our daily work with a passion for perfection, avoiding
incidents by managing the risks of our activities, taking initiatives and a desire to learn and share that learning with colleagues, we all can make a difference.
We lead innovation
Innovation is the cornerstone of our success and our future depends on it. Innovation will ensure that we have attractive
products for our markets, and a steady supply of new technologies, products, applications and customers. We aim to be
the leaders in our industry and not the followers.

LEM | Annual Report 2015/16

14

Corporate Governance Report
The following information complies with the Corporate Governance Directive of the SIX Swiss Exchange (SIX) and the disclosurerules of the Swiss Code of Obligations. In order to enhance the clarity of this chapter, reference is made to other parts of theAnnual Report and our website (www.lem.com). Key elements are contained in the Articles of Incorporation.
1 Group structure and shareholders
Group structure
LEM Holding SA is domiciled at Avenue Beauregard 1, CH-1700 Fribourg. LEM's registered shares are listed on the main
segment of the SIX Swiss Exchange (LEHN, security no. 2 242 762; ISIN 0022427626). On 31 March 2016, the market
capitalization was CHF 929 million.
LEM Group is structured into the Industry segment and the Automotive segment. Appropriate segment reporting pursuant to IFRS is contained in note 3 to the consolidated financial statements. All companies in LEM Group are listed under"Scope of consolidation" in note 24 of the consolidated financial statements, with their respective company names, registered offices, share capitals and the relevant percentages of shares held. There are no other listed companies in thescope of consolidation.
Significant shareholders
On 31 March 2016, the following shareholders held 3% or more of the share capital and voting rights:
In number of shares/options,per cent of shareholding

31.3.2016
Options
PositionIn %SharesWerner O. Weber and Ueli Wamp507'485 20'000
527'485
46.3%
fler, in Zollikon/Wollerau, Switzerland, through WEMACO Invest AG
and Swisa Holding AG, in Zug/
Cham, Switzerland
Ruth Wertheimer, in Kfar Shmaryahu,
141'581
N/N
141'581
12.4%
Israel, through 7-Industries Holding
B.V., in Amsterdam, Netherlands
Montanaro Asset Management Ltd,
57'394
N/N
57'394
5.0%
in London, United Kingdom
Sarasin Investmentfonds AG, in
42'999N/N
42'9993.8%
Basel, Switzerland0
0.0%
Joraem de Chavonay SA, Zug,
20'000 (20'000)
Switzerland
Total shareholders < 3%
370'541
N/N
370'541 32.5%
Total
1'140'000
0 1'140'000 100.0%

480'000

SharesN/N = none notified

31.3.2015
Options

PositionIn %30'000510'000

44.7%

141'581

N/N

141'581

12.4%

74'834N/N

74'834

6.6%

59'813

N/N

59'8135.2%

30'000(30'000)

0

0.0%

353'772
1'140'000

N/N
353'772
31.0%
0 1'140'000 100.0%

N/A = not applicable

Mr. Werner O. Weber and Mr. Ueli Wampfler have notified the Company of the acquisition of 50'000 options from Erwin Studer
and Joraem de Chavonay on 27 June 2012 and of another 50'000 options from the same issuer on 27 November 2013. Bothhave exercised 50'000 options on 10 June 2014, 20'000 options on 23 December 2014 and another 10'000 options on 18 March2016. No other shareholder has notified any options to the Company.
The notifications which have been sent to the Company and the disclosure office of the SIX Swiss Exchange AG during the financial year pursuant to article 20 of the Federal Act on Stock Exchanges and Securities Trading and which have been published on
the latter's electronic publication platform may be viewed via the search function on https://www.six-exchange-regulation.com/
en/home/publications/significant-shareholders.html.
Cross-shareholdings
LEM has no cross-shareholdings with other joint-stock companies.
2 Capital structure
Capital and shares
The nominal value of the share capital of LEM Holding SA is CHF 570'000, which is divided into 1'140'000 fully paid-up
registered shares with a par value of CHF 0.50 each. There are no shares with preferred voting rights. All shareholders
are entitled to the same dividends.
There are no restrictions on the transfer of shares. In order to be registered in the share register, each shareholder shalldeclare that he holds the shares for his own account.
On 31 March 2016, LEM Holding SA held 662 treasury shares.
LEM | Annual Report 2015/16

15

Authorized and conditional capital
There is no authorized or conditional capital, nor are there any profit-sharing certificates or participation in certificates orany convertible bonds outstanding.
3 The Board of Directors
Election, terms of office and cross-involvement
The Board of Directors is comprised of at least three members who are individually elected at the ordinary General Meetingof the Shareholders for a mandate of one year, which is renewable up to an age limit of 70. The Board constitutes itself, except
for the Chairman of the Board of Directors and the members of the Compensation Committee who are elected by the ordinary
General Meeting.
At the ordinary General Meeting on 25 June 2015, Ilan Cohen, Norbert Hess, Andreas Hürlimann and Ueli Wampfler werere-elected. Ulrich J. Looser was elected as new member of the Board of Directors. Andreas Hürlimann was re-elected as
Chairman of the Board. In addition, shareholders elected Norbert Hess and Andreas Hürlimann to the Compensation Committee. Norbert Hess chairs the Committee.
All members of the Board are non executive and have at no time been part of the executive management of LEM.
Servotronix Motion Control Ltd, a company presided by Ilan Cohen, has bought transducers for CHF 662 thousand in 2015/16(CHF 609 thousand in 2014/15), including purchases done by its subsidiaries and subcontractors, from LEM Group at market
price. No other member of the Board of Directors has any significant business connection with LEM Group.
The Board of Directors was comprised of the following members as of 31 March 2016:

From left to right: Norbert Hess, Andreas Hürlimann, Ilan Cohen, Ueli Wampfler, Ulrich J. Looser

Andreas Hürlimann

Position Chairman of the Board of Directors, Member of the Strategy Committee,
Member of the Nomination & Compensation Committee

Nationality Swiss

Entry 2011

Born in 1964

Professional background
Since 2011, Independent board professional and entrepreneur
2005 – 2010, Managing Director, Spencer Stuart, Zürich
1999 – 2005, Global Director of Industry Practices and Member of the Executive Board, Arthur D. Little Inc., London and Paris
1990 – 1999, International business development, sales and management roles with Siemens Schweiz AG, ABB Kraftwerke AG
and Oerlikon Aerospace Inc., Zürich, Baden, Montreal
Other notable activities– –Notenstein Real Estate Investments SICAV, St. Gallen, Chairman of the Board of Directors– –Humanis AG, Chairman of the Board of Directors– –Sobrado Software AG, Chairman of the Board of Directors
Education
M. Sc. Electrical Engineering, ETH ZürichDAS Finance, University of Zürich

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16

Ilan Cohen

Position Member of the Board of Directors, Chairman of the Strategy Committee

Nationality Israeli

Entry 2010

Born in 1956

Professional background
Since 2010, President, Servotronix Motion System Ltd. and Servotronix Motion Control Ltd., Israel
2008 – 2009, General Manager, Kollmorgen Industrial & Commercial Engineered Solutions Ltd. ­( Danaher Group)
1997 – 2008, President and CEO, Kollmorgen Servotronix Ltd.
1987, Founder, Servotronix Ltd.
1983 – 1990, Associate professor, University of Tel Aviv, Israel
Other notable activities– –Board member, Servotronix Motion Control Ltd., Israel– –Chairman of the board, Negba houses for Children at Risk in Israel
Education
Ph.D. Control System, Ecole Polytechnique de Bruxelles, Belgium
MSEE, CALTECH Pasadena, USA
M.Sc. and BSEE Electro-mechanical engineer, Ecole Polytechnique de Bruxelles, Belgium

Norbert Hess

Position Member of the Board of Directors, Chairman of the Nomination & Compensation Committee

Nationality German

Entry 2013

Born in 1960

Professional background
Since 2012, Member of the Management Board, Chief Operating Officer (COO), EPCOS AG, Munich, Germany
2005 – 2012, Head of Ceramic Components Division, EPCOS OHG, Deutschlandsberg, Austria
1999 – 2005, Head of Surge Arresters Business Division, EPCOS AG, Berlin, Germany
1987 – 1999, business, marketing and R&D roles at Siemens AG, Berlin/Erlangen, Germany
Other notable activities– –None
Education
Ph.D., Technical University of Berlin, Germany
M. Sc. Mat. Eng., Technical University of Berlin, Germany

Ulrich J. Looser

Position Member of the Board of Directors, Member of the Audit & Risk Committee

Nationality Swiss

Entry 2015

Born in 1957

Professional background
Since 2009, Berg Looser Rauber & Partner (BLR&Partners)
2001 – 2009, Accenture, various positions including Managing Director Austria/Switzerland/Germany Management Consulting andChairman Accenture AG (Switzerland)
1987 – 2001, McKinsey & Company, industry, energy, pharma and public sector practices, partner election 1993
Other notable activities– –Straumann Holding AG, Member of the Board of Directors– –Kardex AG, Member of the Board of Directors– –Bachofen Holding AG, Chairman of the Board of Directors– –Econis AG, Chairman of the Board of Directors / Co-owner– –Spross Entsorgungs Holding AG, Member of the Board of Directors– –University of Zürich, Member of the University Council– –Economiesuisse, Member of the Board– –University Hospital Balgrist, Member of the Board– –Swiss-American Chamber of Commerce– –Swiss Study Foundation, Head of Finance Committee– –Swiss National Science Foundation, Member of the Executive Committee of the Foundation Council
Education
M.Sc. Physics, ETH Zurich, Switzerland
M.A. HSG, University of St.Gallen, Switzerland

Ueli Wampfler

Position Member of the Board of Directors, Chairman of the Audit & Risk Committee

Nationality Swiss

Entry 2007

Born in 1950

Professional background
Since 2004, Founder and Senior Partner, Wampfler & Partner AG, Zürich
1998 – 2004, Director, STG Schweizerische Treuhandgesellschaft, Zürich
1974 – 1998, STG Coopers & Lybrand, Zürich (partner since 1991)
Other notable activities– –Chairman of the Board of Directors, Swisa Holding AG, Cham (Swisa Group)– –Vice Chairman of the Board of Directors, Merbag Holding AG, Cham (Merbag Group)– –Member of the Board of Directors, Caspar Finanz AG, Baar (Traco Power Group); Rebew AG, Zürich; Otto Frey Beteiligungen AG,
Lupfig (Otto Frey Group)
Education
Lic. oec., University of Zürich, Switzerland
Certified auditor

LEM | Annual Report 2015/16

17External mandates
Pursuant to article 31 of the Articles of Incorporation, members of the Board of Directors may not hold more than ten
additional mandates of which no more than four may be in listed companies. The following mandates are not subject tothe above limitations: (a) mandates in companies which are controlled by LEM or which control LEM; (b) up to five mandates held at the request of LEM or companies controlled by it; and (c) up to six mandates in associations, charitableorganizations, foundations, trusts and employee welfare foundations. Mandates shall mean mandates in the supreme
governing body of a legal entity, which is required to be registered in the commercial register or a corresponding foreign
register. Up to 20 mandates in different legal entities, which are under joint control or same beneficial ownership are
deemed one mandate.
Internal organizational structure
The Board of Directors meets as often as necessary, but six annual meetings are planned in advance. In the completed
financial year, six full-day meetings and one conference call were held. The meetings usually take place at the Company's
seat in Fribourg. The Chairman, after consultation with the CEO and the Chairmen of the committees, determines theagenda for the Board meetings. The members of the Board of Directors can ask for additional items to be included on
the agenda. The Board members receive supporting documents beforehand, allowing for a comprehensive preparationof the meeting. As a rule the CEO and CFO attend the meetings of the Board of Directors without having a right to vote.
Depending on the topics, other members of Executive Management participate in the meetings in order to respond to
specific questions. Decisions can be taken by the Board if at least half of the Directors are present, and a simple majorityof them is sufficient. In the event of tie, the Chairman has the casting vote. Minutes of the meetings including decisions
taken are prepared by the outside Secretary of the Board and distributed to the members of the Board, the CEO and the
CFO.
The Board of Directors reflects, in its working procedures, the efficiency and effectiveness of the teamwork as well as its
interaction with the Management of the Company on a regular basis. Regular feedback sessions at the end of a meetingprovide valuable inputs for the continuous improvement of the Board's coherence and leadership.
Definition of areas of responsibility
The Board of Directors delegates the Management of the Company to the CEO to the fullest extent permitted by the Swiss
Code of Obligations. The Board of Directors reviews and assesses at least on an annual basis and takes decisions in thefollowing areas:– – review and approval of the strategy, business plan, annual business objectives and budget for the LEM Group;– – approval of creation/closing of any subsidiary and purchase/sale of any interest in any company or entry into any merger
or joint venture agreement;– – appointment/dismissal of the Executive Management;– – monitoring the ethical and legal behavior of LEM;
– – review of human resources management, including co-worker satisfaction and management development and legal,
intellectual property, social and environmental aspects.
Information and control systems of the Board of Directors vis-à-vis Management
The Board of Directors ensures that it receives sufficient information from the Management to perform its supervisory
duty and to make the necessary decisions.
The Board of Directors obtains the information required to perform its duties through several means:– – the Board of Directors receives monthly and quarterly reports on the current development of the business;– – informal meetings and teleconferences are held as required between the Chairman and the CEO as well as between the
Chairman and individual members of the Board;– – the Committees meet at regular intervals and exchange detailed information with the Executive Management;– – the Board receives detailed information to each agenda item one week before the Board meeting;– – each Executive Manager joins at least one Board session in any given year.

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Business risk management
In compliance with Swiss law, LEM is using a standardized procedure to analyze its business risks. LEM's risk management
covers all types of risk: financial, operational and strategic – including the external business environment, compliance andreputational aspects.
The Executive Management conducts an annual risk analysis. The results and consecutive action plans are thereafter presented to and formally approved by the Board of Directors.
The risk management approach follows five steps: in a first step, potential hazards are evaluated and a consolidated list
with 5 to 10 main hazards is set up. In a second step, each hazard is assessed by a product of probability and quantified
impact. Step two results in a risk map, which visualizes LEM's potential risk environment. In step three, an action plan is
put in place to mitigate the risks. The hazards thereafter are revalued a second time, taking into consideration the mitigation measures. In step four, the action plan is validated and thereafter monitored on a quarterly basis (step five).
Internal control system
In compliance with Swiss law, LEM has put in place an internal control system.
Starting from the material positions in the financial result of the Annual Report, the important underlying processes and process owners have been identified. For each process, key risks that could lead to errors in the financial reporting have been
identified. For each key risk, key controls have been defined and responsibilities assigned to assure effective compliance anddocumentation of the key controls. The process has been presented to and approved by the Audit & Risk Committee.
Looking forward, the process owners will perform an annual process review whereby identified weaknesses shall be continuously improved and key risks and controls shall be updated. Based on the input of the process owners, the CFO preparesan annual report on the internal control system, which is presented to and discussed with the Audit & Risk Committee.
Committees
Three standing committees support the Board of Directors. They are comprised of two nonexecutive members of theBoard of Directors. They meet whenever necessary but at least twice a year.
– – The primary objective of the Audit & Risk Committee (ARC) is to provide the Board of Directors with effective support
in financial matters, in particular the selection and supervision of the external auditor, assessment of the effectiveness,compliance and clarity of the Group financial reporting and the assessment and preparation of the financial reports tothe shareholders. Furthermore, it reviews critical accounting policies, financial control mechanisms and compliancewith corresponding laws and regulations as well as the development and continuous improvement of the internal control system. If required, the external Group auditors are invited to participate at the meeting. The ARC prepares proposals to be decided by the Board of Directors. In the completed financial year, three half-day meetings were held.
– – The Nomination & Compensation Committee (NCC) deals with succession, recruitment and compensation of the members of the Board of Directors and the Executive Management. It ensures and monitors the personnel development plan
and adequate succession planning for the middle and top management. It supports the Board of Directors in establishing and reviewing the compensation strategy and guidelines and the performance objectives as well as in preparing the
proposals to be submitted to the General Meeting regarding the compensation of the Board of Directors and of the
Executive Management. It reviews and updates the compensation policy for the members of the Board of Directors andthe Executive Management and the performance-based compensation system for the Executive Management. The NCC
prepares proposals to be decided by the Board of Directors. In the completed financial year, three half-day meetings
and three telephone conferences were held.
– – The primary objective of the Strategy Committee (SC) is to assist the Board of Directors in fulfilling its duties with respect
to determining the Company's strategy and the appropriate means to pursue it, including LEM's organizational setup.
As strategic work and its successful implementation is based upon coordinated and interlocking activities between
Executive Management and the Board, the SC ensures close collaboration with the CEO and the Executive Management. The SC prepares proposals to be decided by the Board of Directors. The Board of Directors may also decide todelegate members of the SC to assist in steering longer-term strategic initiatives by joining the project-steering committee. In the completed financial year, two half-day meetings and five telephone conferences were held.

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19

4 Executive Management
The Executive Management was comprised of the following members as of 31 March 2016:

From left to right: Frank Rehfeld, Andrea Borla, François Gabella, Rainer Bos

François Gabella

Function CEO LEM Group

Nationality Swiss

With LEM since 2010

Born in 1958

Previous companies and positions
2006 – 2010, CEO, Tesa SA
2002 – 2006, SVP, Areva
1996 – 2002, Business Area Manager, ABB Power Transformers
Education
M. Sc. Microtechnics EPFL, Lausanne, Switzerland
MBA, IMD, Lausanne, Switzerland

Andrea Borla

Function CFO LEM Group

Nationality Swiss

With LEM since 2015

Born in 1967

Previous companies and positions
2008 – 2015, CFO, Schindler France
2003 – 2007, Field Operations Manager, Schindler China
1999 – 2003, Area Controller, Schindler Asia Pacific1996 – 1999, Head of Group Consolidation, SAirGroup
Education
Ph.D., M.A. HSG, Finance and Accounting, St.Gallen, Switzerland

Rainer Bos

Function Senior Vice President Automotive

Nationality German

With LEM since 2015

Born in 1962

Previous companies and positions
2011 – 2015, General Manager, Amphenol Tuchel Electronics GmbH
2001 – 2011, Business Unit Director, Delphi Deutschland GmbH
1991 – 1999, Key Account Manager, Continental-Teves KGaA
Education
Dipl. Eng. Industrial Engineering, TU Darmstadt, Germany

Frank Rehfeld

Function Senior Vice President Industry

Nationality German

With LEM since 2016

Born in 1968

Previous companies and positions
2009 – 2015, VP Drives, Brose China Co., Ltd.
2006 – 2009, Managing Director, Hella Shanghai Electronics Co., Ltd.
2004 – 2006, Siemens VDO China, Director Body/Chassis Electronics
1996 – 2004, Siemens VDO Germany, Director R&D Body/Chassis Electronics
Education
Dipl. Eng. Electrical Engineering, Erlangen-Nuremberg, Germany

LEM | Annual Report 2015/16

20

François Gabella is member of the Swissmem's Executive Committee. Apart that, none of the members of the Executive
Management have other activities in governing or supervisory bodies, any official functions or political posts nor any permanent management functions for important Swiss and foreign-interest groups.
External mandates
Pursuant to article 31 of the Articles of Incorporation, and subject to approval by the Board of Directors, members of the
Executive Management may not hold more than three additional mandates of which no more than one may be in listedcompanies. The following mandates are not subject to the above limitations: (a) mandates in companies which are controlled by LEM or which control LEM; (b) up to five mandates held at the request of LEM or companies controlled by it;
and (c), subject to approval by the Board of Directors, up to three mandates in associations, charitable organizations,foundations, trusts and employee welfare foundations. Mandates shall mean mandates in the supreme governing bodyof a legal entity, which is required to be registered in the commercial register or a corresponding foreign register. Up to
20 mandates in different legal entities, which are under joint control or same beneficial ownership are deemed one mandate.
Management contracts
There are no management contracts with companies or individuals outside LEM Group.
5 Compensation and shareholdings
Please refer to the section "Compensation Report" following on page 23.
6 Shareholders' participation rights
The rules on shareholders' participation rights are outlined in the Articles of Incorporation. The rules for the convening ofGeneral Meetings of the Shareholders, the participation rights and the majority rules for decisions are all following the
Swiss law. The complete Articles of Incorporation can be downloaded from the Investor Relations pages on the Internet
page www.lem.com.
Voting rights and representation restrictions and inscription in the share register
There are no limitations on voting rights for shareholders who are entered into the shareholders' register with voting rights. Anyone purchasing registered shares is registered by the Board of Directors in the share register on request as a shareholder withvoting rights, provided he expressly declares that the shares have been bought and will be held for his own account.
Each shareholder may be represented by the independent representative or by a third party who need not be a shareholder of
LEM Holding SA.
Statutory quorums
The Articles of Incorporation contain no deviation from the applicable law. In case a second vote is necessary for elections,a relative instead of the absolute majority of the votes represented is required.
Convocation of the General Meeting of the Shareholders
Registered shareholders are convened to General Meetings by ordinary mail and by publication in the Swiss Official Gazetteof Commerce at least 20 days prior to the day of the meeting. Any shareholder who is registered as a shareholder, on the
day determined by the Board of Directors, has the right to attend and vote at the General Meeting.
AgendaAccording to article 12 of the Articles of Incorporation, one or several shareholders who collectively hold 10% of the sharecapital can call for a shareholders' meeting and submit matters to be placed on the agenda.
Dividend policy
LEM targets a payout ratio significantly above 50% of the consolidated net profit for the year, to be proposed by the Boardof Directors to the General Meeting of the Shareholders.
7 Change of control and defensive measures
Opting-out clause
In June 2010, the General Meeting of the Shareholders introduced an opting-out clause according to article 32 of
the Federal Act on Stock Exchanges and Securities Trading (SESTA) in the Articles of Incorporation of the Company.
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21

This clause releases any shareholder from the obligation to submit a public takeover offer to all shareholders if his
participation in LEM exceeds 331/3 % of the voting rights. The Swiss Takeover Board has decided on 22 September 2011that a passing of the 331/3 % threshold by the shareholder group Weber & Wampfler would not trigger the obligation fora public takeover offer.
Clauses of changes of control
There is no particular clause in the Articles of Incorporation for changes of control. No member of the Executive Management will receive additional severance payments if dismissed in the case of a change of control of the Company.
8 Auditors
The duration of the auditors' mandate is one year. Ernst & Young have been auditing LEM since the financial year 2005/06,
with Arthur Bergmann bearing the responsibility for the audit since 2013/14.
Ernst & Young charged the following fees for professional services rendered for the 12-month period ending 31 March 2016:
Type of service
In CHF thousands

2015/16

Audit services
Tax services
Total

410
0
410

Evaluation and control of the auditors is done by the ARC which makes recommendations to the Board of Directors. In
particular, the ARC evaluates the performance, fees, and independence of the auditors.
The auditors report on the results of their audits both orally and in writing. Financial statements as well as management
letters are discussed in the ARC in the presence of the external auditors.
During 2015/16 Ernst & Young attended two regular ARC meetings.
9 Information policy
LEM informs its shareholders on the business status and its results on a quarterly basis. After the first six months, a halfyear report is published. This report, as well as the Annual Report, is made publicly available on its website www.lem.com
and may be obtained in print from the Company's headquarters. Once a year, LEM holds a presentation for the media,
investors and financial analysts. Internal processes assure that price-sensitive facts are published without delay in accordance with the ad hoc publicity rules of the SIX Swiss Exchange.
At www.lem.com, detailed information is available, e.g., the Articles of Incorporation, interim and annual reports, investor
presentations, press releases as well as the financial calendar.
Contact for investors and media: Andrea Borla, CFO, Chemin des Aulx 8, CH-1228 Plan-les-Ouates, or send an e-mail toinvestor@lem.com (phone: +41 22 706 12 50).

LEM | Annual Report 2015/16

22

Compensation Report
The future of LEM depends on our ability to attract, develop and retain talented people. Among the many measures we
use to achieve this goal are competitive remuneration policies for our Executive Management. Our compensation policies
are designed to align the Executive Management's and the Board of Director's interest with shareholders' interest.
In brief:– – Core principles
	LEM's compensation policies are designed to reward results and performance as well as to create long-term value forshareholders. The compensation policies are approved by the Board of Directors upon recommendation by the Nomination & Compensation Committee (NCC) and reviewed on an annual basis. All fixed and variable compensation is paidin cash.
	The Articles of Association of LEM contain provisions regarding the approval of compensation of the Board of Directors
and the Executive Management (article 27), the supplementary amount for new members of the Executive Management(Article 28), the general compensation principles (article 29) as well as provisions regarding the agreements with members of the Board of Directors and the Executive Management (article 30). www.lem.com > Investor Relations > Corporate Governance.
	The Remuneration Report is based on section 5 of the annex to the Corporate Governance Directive issued by SIX Swiss
Exchange and article 13 to 17 of the Ordinance against Excessive Compensation in Listed Stock Companies (OaEC).
LEM is implementing the requirements of the OaEC.
– – Compensation of the Board of Directors
	The compensation of the Board of Directors consists exclusively of a fixed fee paid in cash. There is no additionalvariable compensation. The compensation for the Chairman and the members of the Board of Directors depends on
the amount of responsibility of each member of the Board of Directors and all work related to the Board of Directors
membership such as Committee activity.
– – Compensation of the Executive Management
	In order to encourage and reward results that contribute to the sustainable success of LEM, the total compensation of
the Executive Management consists of three elements: base salary, variable compensation and nonwage compensation.
The target-setting process for the variable compensation is carried out on an annual basis and includes quantitative andqualitative performance criteria, including financial results of LEM.
– – Changes to the compensation policies
	Starting from the financial year 2015/16, the short-term incentive plan based on target and maximum bonus as percentage of base salary has been replaced by the L4R short-term incentive plan based on target and maximum bonus amounts.
1 Board of Directors
1.1 General principles for compensation of nonexecutive Directors
The compensation for the Board of Directors is approved by the General Meeting of the Shareholders upon proposal by
the Board of Directors based upon recommendation by the NCC. The remuneration of the Board of Directors consists ofa fixed cash payment and is reviewed on an annual basis. The remuneration compensates for the personal responsibility
and exposure as a nonexecutive member of the Board of Directors and all work related to the Board of Directors membership. There is neither an additional variable compensation nor any participation in an equity-based compensation plan.
Each member of the Board of Directors shall be a shareholder of LEM. The number of shares to be acquired on the market within a period of three years after joining the Board of Directors shall reach a value of approximately three annual
fixed compensations. Trading LEM shares has to respect LEM's disclosure, insider-trading policy as well as all applicable
rules and legislation.
1.2 Remuneration of nonexecutive Directors
The Board of Directors adopted a remuneration scheme with a fixed fee paid in cash in the amount of CHF 220'000 for
the Chairman, CHF 130'000 for the Vice Chairman and CHF 80'000 for each member. Committee activity will be compensated with CHF 40'000 for the Committee's chairman and with CHF 20'000 for each member. As long as no Vice
Chairman is appointed, the Chairman receives a supplementary amount of CHF 30'000 for the additional workload.

LEM | Annual Report 2015/16

23

The tables below show the compensation paid to each member of the Board of Directors in the financial years 2014/15 and2015/16. The shareholders approved at the ordinary General Meeting on 25 June 2015 a maximum aggregate amount of compensation of the Board of Directors for the term of office from the ordinary General Meeting 2015 until the ordinary General
Meeting 2016 of up to CHF 900 thousand. This compares with the aggregate amount of CHF 785 thousand effectively paid.
2015/16
Annual salary

Additional fees

Total compensation

Company's
contribution to social
security charges

Andreas Hürlimann 1, 6, 8

290

0

290

18

Ilan Cohen 7

120
120
100
120
750

0
0
0
0
0

120
120
100
120
750

0
0
9
8
35

In CHF thousands

Norbert Hess 5
Ulrich Jakob Looser 4
Ueli Wampfler 3
Total
2014/15
In CHF thousands

Andreas Hürlimann 1, 4, 7
Peter Rutishauser 2, 5, 8
Ilan Cohen 8
Norbert Hess 6
Ueli Wampfler 3
Total
Chairman of the Board
Vice Chairman of the Board
3
Chairman of the Audit & Risk Committee

Annual salary

Additional fees

Total compensation

Company's
contribution to social
security charges

280
190
100
100
120
790

0
0
0
0
0
0

280
190
100
100
120
790

18
17
0
0
8
42

Member of the Audit & Risk Committee
Chairman of the Nomination & Compensation Committee
6
Member of the Nomination & Compensation Committee

1

4

7

2

5

8

Chairman of the Strategy Committee
Member of the Strategy Committee

1.3 Shareholdings of nonexecutive Directors
31.3.2016
Number ofshares held

In number of shares/options

31.3.2015

Number ofoptions held

Number ofshares held

Number ofoptions held

Board of Directors
Andreas Hürlimann

960

0

793

0

Peter Rutishauser
Ilan Cohen
Norbert Hess
Ueli Wampfler
Ulrich Jakob Looser
Total

N/A
170
0
68'0000
69'130

N/A
0
0
0
0
0

2'606
170
0
55'000N/A
58'5690
0
0
10'000N/A
10'0002 Executive Management
2.1 General principles for compensation of Executive Management
Remuneration for the Executive Management is approved by the ordinary General Meeting of Shareholders upon recommendation by the Board of Directors. The proposal of the Board of Directors is based on the recommendation of
the NCC. The remuneration of the Executive Management is reviewed on an annual basis.
The total compensation 2015/16 for the Executive Management consists of three elements:
1.	Base salary;
2.	Variable compensation according to LEM's incentive schemes: The variable compensation consists of a short-term
incentive component and a long-term incentive component. The short-term incentive (STI) is based on the Leadershipfor Results (L4R) plan which sets a target short-term incentive amount with a cap at 150% payout. The STI compensates for the actual annual results and achieved performance. The long-term incentive is based on the LEM Incentive
System pursuant to which the long-term incentive amount is calculated as a percentage of the base salary with a cap
at 150% payout. This long-term incentive plan rewards the members of the Executive Management for sustainablefinancial performance of the LEM Group;
3.	Nonwage compensation
LEM | Annual Report 2015/16

24

Total compensation shall be in line with the market for comparable industrial companies taking into account the various
remuneration levels for different functions within the LEM Group. The compensation mix between base salary, variable
compensation and nonwage compensation shall reflect sectorial and functional market practice. Benchmarking is carriedout periodically.
2.1.1 Base salary of Executive Management
Base salaries are paid monthly as fixed cash amounts.
2.1.2 Variable compensation of Executive Management
The target-setting process for the Leadership for Results (L4R) plan is part of the LEM performance management and is
carried out on an annual basis by the NCC. All variable compensation is paid in cash and after approval by the shareholders based on the finalization of the respective year-end closing based on the annual accounts and the personal performance review. Objectives and performance evaluations are prepared by the Chairman of the Board of Directors for the
CEO and by the NCC for the other members of the Executive Management.
Short-term variable compensation related to the individual's function and responsibility and obtained results
The individual target amount for the short-term incentive plan is communicated to the member of the Executive Management at the beginning of the financial year together with the objectives. The target amount and the objectives are basedon the role and impact of the Executive as well as annual company priorities. Objectives are linked to bottom line indicators, quantitative or qualitative targets. At the end of the year, the evaluation of the performance will take place.
The number of objectives is large enough to allow the members of the Executive Management to reach a fair level of shortterm variable compensation rewarding them for the results achieved even under changed business conditions. Since thedegree of achievement of set objectives has to be evaluated at the end of the period, a clear understanding of the metrics
to be applied has to be established at the time of target setting and kept constant for the whole period. For each objective, the curve between minimum and maximum bonus level is defined. Ambitious but achievable objectives shall be set
as targets, at which 100% of the respective target amount shall be attributed.
For the Executive Management, the minimum payout of the short-term incentive is 0% of the target amount and the maximum payout 150%, compared to 125% under the previous scheme.
Long-term variable compensation related to the sustainable financial performance of LEM GroupThe long-term incentive is an annual long-term incentive defined as percentage of base salary which is based on theperformance of LEM evaluated over a period of three consecutive years (2013/14 – 2015/16). The performance criterion
is the cumulated economic value added (EVA) over these three financial years. The definition of the EVA objective takes
place at the beginning of year one and the evaluation of the performance at the end of year three. Once the forwardlooking EVA objective is defined, the EVA objective remains unchanged over the period of three years.
For the long-term incentive cycle ending 2015/16, the maximum value of the annual long-term variable compensation
amounts to 48% of the base salary for the CEO and of 30% for the former members of the Executive Management.
Members of the Executive Management hired during the financial year 2015/16 are not entitled to participate in thelong-term incentive cycle for the financial year 2015/16.
2.1.3 Nonwage compensation of Executive Management
For the Executive Management, nonwage compensation includes pension plans (retirement benefits) only. LEM has a policy
to limit nonwage compensation to what may be required for the jobholder as a work instrument to fulfill his/her function
according to generally accepted local customs.
Executive Management benefits from LEM's Swiss pension plan, considered a defined contribution plan under Swiss lawthat provides retirement benefits and risk insurance for death and disability. Under IFRS, this plan is considered as a defined
benefit plan. The insured compensation includes base salary only, is based upon Swiss professional pension regulations
and without limitation on the amount. The pension fund is funded by contributions from the company and the insured employees. The average contribution ratio is 43% by the Executive and 57% by the Company. As of 1 January 2015, two additional
pension plans allow the members of the Executive Management to increase the employee contribution to pension, while
maintaining company contribution constant. As of January 2016, the Executive Management's variable compensation will
also be subject to pension fund contribution and enabling the members of the Executive Management to increase theemployee contribution to pension, being cost neutral for the Company.

LEM | Annual Report 2015/16

25

2.2 Remuneration of Executive Management
2015/16

In CHF thousands

Total­c ompen­s ation

Company's
contribution tosocial security
chargesBase salary

Short-term
incentive

Long-term
incentive

Company's
contribution topension fund

480
1'123

274
577

203
185

114
137

1'071
2'023

82
158

1'603

850

388

251

3'093

241

Total
­c ompen­s ation

Company's
contribution tosocial security
chargesFrançois Gabella, CEO
Executive Management(excl. CEO)
Total Executive
Management
2014/15

In CHF thousands

Base salary

Short-term
incentive

Long-term
incentive

Company's
contribution topension fund

480
1'406

245
386

192
298

61
129

977
2'219

78
174

1'886

631

490

190

3'196

252

François Gabella, CEO
Executive Management(excl. CEO)
Total Executive
Management

The amounts are shown as follows:– – Base salary: as paid out in the reporting period– – Short-term incentive 2015/16: as proposed to the ordinary General Meeting in June 2016 for payout in July 2016
– – Long-term incentive 2015/16: as accrued for in the reporting period for payout in July 2016
The compensation of former members of the Executive Management staying within the Company after stepping downfrom the Executive Management for their work as Non-Executive Management members are not taken into account in thenumbers above.
Amounts approved by last year's General Assembly:– – Maximum amount base salary (valid from 1 October 2015 to 30 September 2016: CHF 2'800'000)– – Maximum amount long-term incentive 2015/16 for payment in 2017/18: CHF 1'050'000– – Short-term incentive amount 2014/15: CHF 700'000– – Pension fund contribution and company contribution to social security charges: as paid out or accrued for in the reporting
periodChanges in Executive Management during the financial year 2015/16
Executive Management since 1 January 2016:– – François Gabella, CEO– – Andrea Borla, CFO since 1 November 2015
– – Rainer Bos, Senior Vice President Automotive since 1 July 2015
– – Frank Rehfeld, Senior Vice President Industry since 1 January 2016
Departures from Executive Management in the financial year 2015/16:– – Hans Dieter Huber, stepped down as member of the Executive Management as of 1 January 2016
– – Simon Siggen, stepped down as member of the Executive Management as of 1 January 2016
– – Jean-Marc Peccoux, stepped down as member of the Executive Management as of 1 January 2016
– – Julius Renk: CFO until 15 July 2015, contract ended on 31 August 2015
– – Luc Colombel: VP Automotive until 1 July 2015, contract ended on 31 December 2015
Compensation of former members and related parties
In the financial year 2015/16 the former members of the Executive Management who left the Company received after theirdeparture from the Executive Management payments in the amount of CHF 651'000, including compensation for their
non-compete obligation.

LEM | Annual Report 2015/16

26

2.3 Shareholdings of Executive Management
Executive Management
In number of shares/options

François Gabella, CEO
Andrea Borla, CFO
Frank Rehfeld, SVP Industry
Rainer Bos, SVP Automotive
Total

31.3.201631.3.2015

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

600
0
0
0
600

0
0
0
0
0

400
N/A
N/A
N/A
400

0
0
0
0
0

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

N/A
N/A
N/A
N/A
N/A
N/A

0
0
0
0
0
0

0
2'100
1'265
1'500
1'100
5'965

0
0
0
0
0
0

Shareholdings of former members of Executive Management
Former Executive Management
In number of shares/options

Julius Renk, CFO
Luc Colombel, Vice President, Automotive
Hans-Dieter Huber, Vice President, Industry
Jean-Marc Peccoux, Vice President, R&D and IP
Simon Siggen, Vice President, Operations
Total

31.3.201631.3.2015

3 Loans to current and former members of the Board of Directors and Executive Management and related parties
In financial years 2015/16 and 2014/15, no loans were granted and are outstanding to current or former members of theBoard of Directors, the Executive Management or to related parties.

LEM | Annual Report 2015/16

27

Auditor's Report
Report of the statutory auditor on the remuneration report
We have audited the remuneration report of LEM Holding SA for the year ended 31 March 2016. The audit was limited tothe information according to articles 14–16 of the Ordinance against Excessive Compensation in Stock Exchange Listed
Companies (Ordinance) contained in the parts 1.2 to 1.3 (on pages 23 to 24) and parts 2.2 to 2.3 and part 3 (on pages
26 to 27) of the remuneration report.
Responsibility of the Board of Directors
The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report in accordance with Swiss law and the Ordinance. The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.
Auditor's responsibility
Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law andarticles 14 – 16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration reportwith regard to compensation, loans and credits in accordance with articles 14 – 16 of the Ordinance. The procedures
selected depend on the auditor's judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods
applied to value components of remuneration, as well as assessing the overall presentation of the remuneration report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
OpinionIn our opinion, the remuneration report for the year ended 31 March 2016 of LEM Holding SA complies with Swiss law
and articles 14–16 of the Ordinance.
Lancy, 26 May 2016
Ernst & Young Ltd

Arthur Bergmann
Licensed audit expert(Auditor in charge)

LEM | Annual Report 2015/16

Karine Badertscher Chamoso
Licensed audit expert

28Renewable energy & power supply:
MV/LV substation
Original power (high voltage: HV) is
generated by power plants at various
places. This power is adapted 2 times
all along its way to cities in order tosimplify its transmission and also inorder to supply applications with theright levels of voltage.
At the level of the cities, the latest adaptation is realized insidea so-called MV/LV substation adapting the voltage level frommedium-voltage (MV) to low-voltage (LV).

ART

Within the MV/LV substation, the incoming power flow from
the MV side (1) is managed by the MV switchgear (2) before
being converted by the transformer (3) into LV (6). The smart
meter (5) installed in the LV panel (4) measures the transformer's (3) health with three independent LEM current sensors(ART) (A). The design of ART allows safe commissioning of thesmart meter on an operating transformer.

A

5
3

4

6

2

A
1
2
3
4
1

5
6

ART
Medium-voltage (MV) side
Medium-voltage switchgear
Transformer
Low-voltage panel
Smart meter
Low-voltage (LV) side
LEM | Annual Report 2015/16

29

Financial Review
Highlights– – Net profit increased from CHF 43.1 million in the previous year to CHF 43.5 million in the reporting year, despite challenging foreign exchange and market conditions– – Operating profit margin reached 20.2%, above LEM's 15% to 20% EBIT target range– – Free cash flow amounted to CHF 39.0 million; CHF 40.4 million alone was generated during the second semester 2015/16– – Net working capital increased by CHF 4.4 million to CHF 42.3 million, mainly due to a higher level of accounts receivables not yet due– – Proposed dividend payout of CHF 39.9 million (CHF 35 per share), corresponding to 91.7% of the net profit for 2015/16

In CHF thousands, %2011/12*2012/13**2013/142014/15

2015/16

Sales
Sales growth LEM Group
Sales growth Industry
Sales growth Automotive

236'334(20.2%)(23.6%)
19.1%

234'953(0.6%)(4.0%)
24.8%

245'638
4.5%
5.5%(1.2%)

257'757
4.9%
4.7%
6.2%

261'4541.4%(2.7%)
26.1%

Gross margin
Gross margin in % of sales

92'29939.1%

98'55741.9%

115'371
47.0%

118'39245.9%

120'393
46.0%

Sales, General and Administration expense
SG&A in % of sales(44'716)(18.9%)(43'008)(18.3%)(45'202)(18.4%)(48'845)(19.0%)(52'883)(20.2%)

R&D expense
R&D in % of sales(13'412)(5.7%)(14'722)(6.3%)(14'441)(5.9%)(15'337)(6.0%)(14'602)(5.6%)

Operational EBIT
Operational EBIT growth
Operational EBIT in % of sales
Operational EBIT as % of sales Industry
Operational EBIT as % of sales Automotive

34'171(43.4%)
14.5%
14.3%
15.4%

40'828
19.5%
17.4%
18.2%
12.6%

55'728
36.5%
22.7%
24.1%
14.0%

54'209(2.7%)
21.0%
22.6%
11.8%

52'908(2.4%)
20.2%
20.0%
21.4%

Additional stock option plan costs/income

315

0

0

0

0

EBIT
Financial result
Income tax
Effective tax rate

34'486(1'962)(4'037)(12.4%)

40'828(1'514)(6'914)(17.6%)

55'728(1'379)(8'709)(16.0%)

54'209(2'674)(8'404)(16.3%)

52'908742(10'163)(18.9%)Net profit for the year
Net profit growth
Net profit in % of sales

28'487(28.1%)
12.1%

32'40013.7%
13.8%

45'641
40.9%
18.6%

43'131(5.5%)
16.7%

43'4870.8%
16.6%*	Restatement after changes in classifications from 2011/12 on. The 2011/12 restatement lowered gross margin as percentage of sales by 1.8%pt,
decreased SG&A as percentage of sales by 2.0%pt and increased R&D as percentage of sales by 0.2%pt.
**	Restatement following IAS19R application (pensions).

Sales
Sales in the financial year 2015/16 totaled CHF 261.5 million, an increase of 1.4% compared with the previous year. At
constant exchange rates, group sales increased by 3.6%. The unfavorable currency impact arose mostly from the depreciation of the euro.
Operational profitability
LEM's gross margin remained stable at 46.0% (45.9% in the previous year). The negative currency impact and the constant price pressure were compensated through the continued production transfer to our cost competitive sites in China
and Bulgaria, optimized sourcing and lower commodity prices.
Operating expenses (SG&A plus R&D expenses) increased from CHF 64.2 million to CHF 67.5 million, driven by a higher
level of headcounts in both Beijing and Sofia and some nonrecurrent cost from the introduction of the new ERP systemand organizational changes at the Executive Committee.

LEM | Annual Report 2015/16

30

Net sales

Gross margin

300

130

275

120

250

110

225

100

200

90

In CHF millions% of sales

50%

44%

41%

40

75

20

25

10

38%

0

0

11/12

12/13

13/14

14/15

15/16

9%
8%

12

7%
6%

9

6

0%

0
13/14

14/15

In CHF millions

35%% of sales

20%
18%

35
30
25
20

10
5
0
13/14

14/15

15/16

60

30%

13/14

14/15

% of sales

35%

30%

45
25%

40

25%

40
35

20%

20%

30
25

25

15%

20

15%

20
15

15
10%

10

10%

10
5

5
5%

0
12/13

13/14

14/15

5%

0
11/12

15/16

12/13

13/14

14/15

Net financial assets

Equity and equity ratio

40

100

25

60

12%

20

50

4%

0

60%

70

50%
40%

40

15

5

70%

80

14%

10

80%

% of assets

90

30

6%

15/16

In CHF millions

35

8%

15/16

50

16%

10%

15

15%
12/13

55

In CHF millions

40

0

In CHF millions% of sales

11/12

Net earnings

20%

10

EBIT

45

15/16

25%

11/12

50

30

30

15/16

55

35

1%

12/13

14/15

60

4%

2%

3

65

5%

3%

11/12

13/14

In CHF millions% of sales

12/13

12/13

Operational EBIT

In CHF millions

11/12

35%
11/12

R&D expenses

30%

40

20

30

50

35%

50

50

100

40%

% of sales

60

60

125

70

47%

70

150

45

In CHF millions

80

175

15

Operating expenses (incl. R&D exp.)

In CHF millions

30%

30

20%

20

10%

10

0%

0
11/12

12/13

13/14

14/15

15/16

11/12

12/13

13/14

14/15

15/16

LEM | Annual Report 2015/16

31

LEM's EBIT remained high and came in at CHF 52.9 million (EBIT margin 20.2%), even though the currency impact negatively affected the operating result by CHF 3.2 million. At constant exchange rates, the previous year's EBIT of CHF 54.2
million would have been exceeded.
Taxes
The tax rate has increased from last year's 16.3% to 18.9% for the financial year 2015/16. Last year's unusually low tax
rate was due to some one-off tax savings in connection with the new Chinese-Swiss double taxation agreement, which
reduced last year's withholding tax rate on dividends from our Chinese subsidiary from 10% to 5%.
Net profit for the year
Net profit for the year was CHF 43.5 million, CHF 0.4 million higher than last year, and represented 16.6% of sales.
This result is the second-highest in LEM's history.

In CHF thousands, %31.3.2012*

31.3.2013**

31.3.201431.3.2015

31.3.2016

Balance sheet analysis
Net working capital
Fixed assets
Noncurrent liabilities
Net operating assets
Net cash/(debt)
EquityEquity ratio
DSO – Days of Sales Outstanding
DIO – Days of Inventory Outstanding
DPO – Days of Payables Outstanding

29'07337'683(5'316)61'440
18'12179'561
60.0%
58
67
41

23'18336'771(3'534)56'42027'62984'049
61.9%
60
63
41

38'70737'803(6'887)
69'622
24'581
94'203
65.1%
65
80
49

37'88739'913(6'777)71'02320'92091'943
65.0%
66
72
28

42'30739'424(9'442)72'29013'60485'894
61.3%
69
72
45

*	Restatement after changes in classifications from 2011/12 on.
**	Restatement following IAS 19R application (pensions).

Balance sheet
LEM has no interest-bearing financial liabilities and a high equity ratio of 61.3% (previous year 65.0%). The equity ratio
drop of 3.7%-points is mainly driven by last year's dividend payout (CHF 45.5 million), which was higher than the net profit
in 2015/16 (CHF 43.5 million), and negative currency translation differences (CHF 2.9 million). In addition, equity was
negatively impacted by CHF 1.0 million because of the remeasurement of the employee pension obligations. In view of
the current low-interest environment, the discount rate used for the evaluation of LEM's pension obligations has been
reduced from 0.9% to 0.5%, thereby increasing the defined benefit obligations at year-end.
Net working capital has increased by CHF 4.4 million, mainly due to the CHF 5.8 million increase in accounts receivables.
Even though LEM managed to reduce the DSO levels from 91 days (per half-year 2015/16) to 69 days (per 31 March 2016),
the previous year's DSO level of 66 days could not be matched.
Cash flow
After a very weak first semester 2015/16 (negative free cash flow of CHF 1.4 million), LEM generated a free cash flow of
CHF 39.0 million for the full year 2015/16. This was achieved thanks to the efforts to bring the accounts receivables backto normal levels. As per 30 September 2015, the accounts receivables were unusually high due to invoicing and collections delays caused by the introduction of our new ERP system.
Dividend
The proposed dividend of CHF 35 is a sign of trust in the company's ability to continue generating strong cash flows in
the future. The proposal follows LEM's dividend policy of distributing significantly more than 50% of its consolidated net
profit to shareholders and corresponds to a payout ratio of 91.7%.

LEM | Annual Report 2015/16

32

LEM Group
Consolidated Financial Statements

Consolidated Statement of Financial Position . . . . . . . . 35
Consolidated Income Statement. . . . . . . . . . . . . . . . . . . . . 36

Consolidated Statement of Comprehensive Income . .

37

Consolidated Statement of Changes in Equity . . . . . . . .

37

Consolidated Cash Flow Statement . . . . . . . . . . . . . . . . . . 38
Notes to the Consolidated Financial Statements. . . . 39

Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

LEM | Annual Report 2015/16

33

LEM | Annual Report 2015/16

34

Consolidated Statement of
Financial Position
AssetsIn CHF thousands

Current assets
Cash and cash equivalents
Accounts receivable
Inventories
Income tax receivable
Other current assets
Total current assets
Noncurrent assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Other noncurrent assets
Total noncurrent assets

Notes

31.3.201631.3.201513'62955'89627'796
1'694
1'739
100'754

20'92050'126
27'545
771
2'338
101'700

5'636
25'1797'630
979
39'424

4'418
25'728
8'878
889
39'913140'178

141'613

Notes

31.3.201631.3.2015921'301
18'230
3'142
1'552
24
593
44'84312'012
18'688
10'2251'501
0466
42'892

1'965
2'054
5'422
9'442

1'854
2'259
2'665
6'777

54'28449'670

570
(502)
9'907
75'91985'894570(283)
12'55279'10591'943140'178

141'613

4
5
6

17
7
8
20

Total assets
Liabilities and equity
In CHF thousands

Current liabilities
Accounts payable
Accrued expenses
Income tax payable
Current provisions
Current financial liabilities
Other current liabilities
Total current liabilities
Noncurrent liabilities
Noncurrent provisions
Deferred tax liabilities
Other noncurrent liabilities
Total noncurrent liabilities

10
11

10
17
11

Total liabilities
EquityShare capital
Treasury shares
Reserves
Retained earnings
Total equity
Total liabilities and equity

12
12
12

LEM | Annual Report 2015/16

35

Consolidated Income Statement
April to March
In CHF thousands

Notes

2015/16

261'454257'757

Cost of goods sold
Gross margin13(141'061)
120'393(139'366)
118'392

Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operating profit

13
13
13

(25'855)(27'323)(14'602)(6)300
52'908(25'156)(24'075)(15'337)(1)
386
54'209Financial expense
Financial income
Exchange effect

14
15
16

(361)
116
987

(251)
199
(2'622)53'65051'535(10'163)(8'404)43'487

43'131

38.18

37.86

Sales

Profit before taxes
Income taxes

17

Net profit for the year
Earnings per share, in CHF
Basic & diluted earnings per share

18

The accompanying notes are an integral part of the consolidated financial statements.

LEM | Annual Report 2015/16

36

2014/15

Consolidated Statement of­Comprehensive Income
April to March
In CHF thousands

Notes

2015/16

2014/15

43'487

43'131(2'864)(2'864)

3'716
3'716

(952)
190
(762)

(5'096)
1'092(4'004)

Other comprehensive income/(loss) for the period, net of tax(3'625)(288)

Total comprehensive income for the period

39'86242'843

Net profit for the period recognized in the income statement
Other comprehensive income to be reclassified to profit andloss in subsequent periods
Currency translation difference
Total other comprehensive income to be reclassified to
profit and loss in subsequent periods
Other comprehensive income not to be reclassified to
profit and loss in subsequent periods
Remeasurement gains/(losses) on defined benefit plans
Income tax
Total other comprehensive income not to be reclassified to
profit and loss in subsequent periods

20
17

Consolidated Statement of
Changes in Equity
Attributable to shareholders
In CHF thousands

1 April 2014
Net profit of the year
Other comprehensive income/(loss)
Total comprehensive income
Dividends paid
Movement in treasury shares
31 March 2015 / 1 April 2015
Net profit of the year
Other comprehensive income/(loss)
Total comprehensive income
Dividends paid
Movement in treasury shares
31 March 2016

Notes

Share
­c apital

TreasurysharesCapitalreserve

Translation
reserve

570

(745)

12'688(3'390)12, 20

3'716
3'716

12
12
570

462
(283)

(462)
12'22612, 20326(2'864)(2'864)

12
12
570

(219)
(502)

219
12'445(2'538)Retainedearnings

Total
equity85'081 94'203
43'131 43'131(4'004)(288)
39'127 42'843(45'568) (45'568)
465
465
79'105 91'943
43'487 43'487(762) (3'625)
42'726 39'862(45'547) (45'547)
(365)
(365)
75'919 85'894

The amount available for dividend distribution is based on LEM Holding SA's shareholders' equity determined in accordance with the legal provisions of the Swiss Code of Obligations.

LEM | Annual Report 2015/16

37

Consolidated Cash Flow Statement
April to March
In CHF thousands

Notes

2015/16

2014/1553'65051'535

230
436
7'050
746
767
1'334
1'308
74
(304)
(19'483)
45'809(459)(6'371)
6'593(237)
45'573

90
134
7'291
47
7
1'420
56
(146)
(5'199)55'236
1'673
348(7'026)(5'005)50'232

7
8(6'881)(439)
717(6'603)(6'151)(3'969)394(9'727)

12
12

(365)
(45'547)25(45'887)465(45'568)(45'103)

Change in cash and cash equivalents(6'917)(4'598)Cash and cash equivalents at the beginning of the period
Exchange effect on cash and cash equivalents
Cash and cash equivalents at the end of the period

20'920(374)
13'62924'581937
20'920Cash flow from operating activities
Profit before taxes
Adjustment for noncash items and taxes paid
– – Net financial result– – Derivative financial instruments revaluation– – Depreciation and amortization– – Impairment loss
– – Gain/loss on disposal of fixed assets– – Increase (+)/decrease (–) of provisions and allowances– – Movement in pension
Interest received
Interest paid
Taxes paid
Cash flow before changes in net working capital
Change in inventory
Change in accounts receivable and other current assets
Change in payables and other current liabilities
Cash flow from changes in net working capital
Cash flow from operating activities
Cash flow from investing activities
Investment in fixed assets
Investment in intangible assets
Increase (–)/decrease (+) in other assets
Cash flow from investing activities
Cash flow from financing activities
Treasury shares aquired (–)/divested (+)
Dividends paid to the shareholders of LEM Holding SA
Increase (+)/decrease (–) in financial liabilities
Cash flow from financing activities

LEM | Annual Report 2015/16

38

Notes to the Consolidated
Financial Statements
1 General information
LEM Group (the Group) is a market leader in providing innovative and high-quality solutions for measuring electrical parameters.
Its core products – current and voltage transducers – are used in a broad range of applications in drives & welding, renewableenergies and power supplies, traction, high-precision, conventional and green cars businesses. The Group has operations inthirteen countries and employs 1'388 people per 31 March 2016. The parent company of LEM Group is LEM Holding SA (theCompany), which is a limited company incorporated in Switzerland.
The financial year ends on 31 March (the year). The registered office is at Avenue Beauregard 1, CH-1700 Fribourg. The Company has been listed on the SIX Swiss Exchange since 1986.
The Board of Directors approved the consolidated financial statements on 19 May 2016, to be submitted for approval by theordinary general meeting on 30 June 2016.

2 Significant accounting principles
2.1 Basis of preparation
The consolidated financial statements of LEM Group have been prepared in accordance with the International Financial
and Reporting Standards (IFRS) and interpretations published by the International Accounting Standards Board (IASB)
and comply with Swiss law.
The consolidated financial statements have been prepared using the historical cost convention except that, as discussed
in the accounting policies below, certain items like derivatives are recorded at fair value.
The financial information is presented in thousands of CHF. The totals are calculated with the original unit amounts, which
could lead to rounding differences. These differences in thousands of units are not changed in order to keep the accuracyof the original data.
2.2 Adoption of new and revised International Financial Reporting Standards and Interpretations
New standards in 2015/16
In 2015/16, LEM Group introduced the following revised standards and interpretations:Standard or­i nterpretation

Title

Effective date

ImpactIAS 19Amendments
Amendments

Defined Benefits Plans: Employee Contributions
Annual improvements to IFRS – 2010– 2012 Cycle
Annual improvements to IFRS – 2011– 2013 Cycle

1 July 2014
1 July 2014
1 July 2014

None
See below
None

According to Annual improvements to IFRS 2010 –  2012 Cycle, the reconciliation of segment assets/liabilities to total
assets/liabilities is only required to be disclosed if the reconciliation is reported to the chief operation. As such reconciliation is not communicated, LEM Group is not anymore disclosing segment assets and liabilities.
Future standards
LEM Group will adopt the following revised standards and interpretations in the future:
Standard or­i nterpretation

IFRS 10 and
IAS 28IFRS 10, IFRS
12 and IAS 28
IFRS 11IFRS 14
IAS 1
IAS 16 andIAS 38
IAS 16 andIAS 41
IAS 27
Amendments
IFRS 15IFRS 9IFRS16Title

Effective date

Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture Amendments to IFRS 10 and IAS 28
Investment Entities: Applying the Consolidation Exception Amendments to
IFRS 10, IFRS 12 and IAS 28
Accounting for Acquisitions of Interests in Joint Operations Amendments
to IFRS 11
Regulatory Deferral Accounts
Disclosure Initiative Amendments to IAS 1
Clarification of Acceptable Methods of Depreciation and Amortization Amendments to IAS 16 and IAS 38
Agriculture Bearer Plants Amendments to IAS 16 and IAS 41

1 January 2016

Equity Method in Separate Financial Statements Amendments to IAS 27
Annual improvements to IFRS 2012– 2014
Revenue from Contracts with Customers
Financial Instruments
Leases

1 January 2016
1 January 2016
1 January 2018
1 January 2018
1 January 2019

1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016

LEM | Annual Report 2015/16

39

The Group will implement the relevant new standards when they become effective, i.e., for annual periods beginning on orafter the effective date stated above. The impact on the capital, financial position, income or cash flow situation of LEM
resulting from the application of above standards and interpretations has not been evaluated but is expected to have nomaterial effects, with the exception of IFRS 16 for which the impact will be analyzed in due time.
2.3 Summary of critical accounting estimates and judgments
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions
that affect the reported amounts of revenues, expenses, assets, liabilities and related disclosures at the date of the financial statements. These estimates are based on management's best knowledge of current events and actions that the Groupmay undertake in the future. However, actual results could differ from those estimates. The key assumptions concerning
the future and other key sources of estimation uncertainty at the reporting date are discussed below.
Impairment of goodwill, other intangible assets and property, plant and equipment
The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy. The
recoverable amounts of cash-generating units have been determined based on value-in-use calculations. Other intangible
assets and property, plant and equipment are tested for impairment if there is a triggering event indicating a potential impairment. These calculations require the use of estimates in particular to the expected growth of sales, discount rates anddevelopment of raw material prices.
Provisions
Provisions are recognized only if the specific criteria under IFRS are met. Provisions represent presumed obligations arising from past events and are recognized only if their amount can be estimated reliably. Nevertheless, provisions are basedon assumptions.
Income and other taxes
The Group operates in multiple jurisdictions with complex legal and tax regulatory environments. Some of these positions
are inherently uncertain and include those relating to transfer pricing matters and the interpretation of income tax laws
applied to complex transactions. The Group periodically reassesses its tax positions. Changes to the financial statement
recognition, measurement, and disclosure of tax positions are based on management's best judgment given any changes
in the facts, circumstances, information available and applicable tax laws.
Employee benefits
The standard requires that certain assumptions are made in order to determine the amount to be recorded for retirement
benefit obligations and pension plan assets, in particular for defined benefit plans. These are mainly actuarial assumptions
such as expected salary increase, employee turnover and discount rates. Substantial changes in the assumed development of any of these variables may significantly change LEM Group's retirement benefit obligation and pension plan assets.
Valuation of deferred tax assets
The carrying amount of deferred tax assets is reviewed on each balance sheet date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
2.4 Basis of consolidation
The consolidated financial statements are comprised of LEM Holding SA and of its subsidiaries.
Subsidiaries
Subsidiaries are those entities over which the Group has the control. Control is when the Group is exposed, or has rights,
to variable returns from its involvement with subsidiary and has the ability to affect those returns through its power overthe subsidiary to direct the relevant activities.
Business combinations are accounted for using the acquisition method. Companies that are acquired or sold during thefinancial year are included in the Group financial statements up to the date of transfer of control. The costs of purchasing
a company are determined as the sum of the fair value of the assets that are to be paid to the seller and the obligations
that are entered into, or acquired, on the date of purchase. Identifiable acquired assets, liabilities and contingent liabilities
are recognized at their fair value as of the date of their acquisition. The Group's share of the purchase price that exceeds
the fair value of the identifiable net assets is recognized as goodwill. The Group's share of the fair value of the identifiable
net assets that exceeds the purchase price is shown as gain on bargain purchase on the income statement.
Intragroup assets and liabilities as well as income and expenses are set off against each other.
Also intragroup unrealized profits on inventories and fixed assets are eliminated.

LEM | Annual Report 2015/16

40

Associates
Investments in associated undertakings are accounted for using the equity method. These are undertakings over which
the Group exercises significant influence, but which it does not control.
No associated undertakings exist as per 31 March 2016 and 31 March 2015.
2.5 Foreign currencies
Functional and presentation currency
The consolidated financial statements are presented in Swiss francs as the presentation currency. The subsidiaries use
local currencies as their functional currency, which is the currency of the primary economic environment in which they
operate.
Foreign currency translation
All assets and liabilities in the balance sheets of subsidiaries that are denominated in the respective functional currencies
are translated into Swiss francs at the year-end exchange rate. Items in the income statement and cash flow statement
are translated at the average exchange rate for the year. The resulting translation differences are recognized in other comprehensive income. When a company is sold, the cumulative translation differences recognized in other comprehensive
income are transferred to the income statement.
The following table summarizes the principal exchange rates that have been used in the translation process.
Currency

Income statement of
2015/16
Average rate in CHF

Income statement of
2014/15
Average rate in CHF

Balance sheet
31.3.2016
Year-end rate in CHF

Balance sheet
31.3.2015
Year-end rate in CHF

BGN
CNY
DKK
EUR
GBP
JPY
RUB
USD

0.549
0.154
0.144
1.073
1.466
0.0081
0.015
0.972

0.603
0.151
0.158
1.180
1.499
0.0085
0.022
0.930

0.555
0.149
0.147
1.093
1.383
0.0086
0.014
0.963

0.535
0.158
0.140
1.046
1.437
0.0081
0.017
0.971

Foreign currency transactions
Foreign currency transactions are translated at the market rate prevailing at that time. The monetary assets and liabilities
are translated at the year-end rates while nonmonetary assets are translated at historical rates. Gains and losses arisingfrom the transactions as well as from the translation of monetary assets and liabilities in foreign currencies are recorded
as income or expenses in the income statement (except from translation differences arising from a monetary item that
forms part of the Group's net investment in a foreign operation, which are included in shareholders' equity).
2.6 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash at bank and cash at postal accounts and bank deposits withan original maturity of three months or less from the date of acquisition, that are readily convertible to known amounts ofcash.
2.7 Inventories
Inventories are stated at the lower of cost or net realizable value. The first-in, first-out (FIFO) method is applied. The costof finished goods and work in process comprise raw materials, direct labor costs and other costs that can be directly allocated, such as production overhead expenditures. Financing costs are not included in inventories. Allowances are established when:– – there is an objective indication that the Group will not be able to sell the goods in due time;– – the goods are damaged, in excess or obsolete;– – the net realizable value is below cost.

LEM | Annual Report 2015/16

41

2.8 Property, plant and equipment
Property, plant and equipment is stated at cost of acquisition or construction, less depreciation and any impairment.
Depreciation is calculated on a linear basis on the following estimated useful life:Land
Buildings
Machinery and equipment
Tools and moulds
VehiclesIT equipmentnil
20 –40 years
5–8 years
2–5 years
3–5 years
3–5 years

Repairs and renewals are charged to the income statement when the expense is incurred. Subsequent expenditure on an
item of property, plant and equipment is capitalized only when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be measured reliably.
2.9 Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net assets of
the acquired subsidiary at the date of acquisition. Goodwill on acquisitions is reported in the balance sheet as an intangible asset and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include
the carrying amount of goodwill relating to the entity sold.
Research & development
Research costs are written off as incurred. An intangible asset arising from development should be recognized if, and only
if the Group can demonstrate the following:– – the technical feasibility of completing the intangible asset;– – Group intention to complete the intangible asset;– – ability to use or sell the intangible asset, the intangible asset will generate probable future economic benefits;– – the availability of adequate technical, financial and other resources to complete the development; and– – ability to measure the expenditure attributable to the intangible asset during its development reliably.
Such development costs are capitalized and written off over the life of the product or process.
Other intangible assets
Other intangible assets with definite useful lives are carried at cost less amortization and any impairment.
Expenditure on computer software, acquired patents, trademarks and licenses is capitalized and amortized using thestraight-line method over their useful lives, not exceeding five years.
2.10 Impairment of tangible fixed assets and ­i ntangible assets
Assets that are subject to depreciation and amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amountby which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's
fair value less cost to sell and value in use.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating unit).
The value in use is calculated based on the estimated future cash flows expected to result from the use of the asset andeventual disposal, discounted using an appropriate noncurrent interest rate.
Goodwill is tested for impairment annually (at 31 March) and when circumstances indicate that the carrying value may be
impaired. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Impairment losses relating to goodwill cannot be reversed in future years.
2.11 Financial assets
Financial assets comprise cash, receivables, accrued income, marketable securities and derivative financial instruments.
Initial recognition and measurement
At initial recognition, financial assets are designated into two categories, financial assets at fair value through profit andloss and loans and receivables.
Financial assets are initially recognized at fair value plus, in the case of a financial asset not at fair value through profit
and loss, directly attributable transaction costs.

LEM | Annual Report 2015/16

42

Subsequent measurement
The subsequent measurement of financial assets depends on their classification:– – financial assets at fair value through profit and loss (refer to note 2.12);– – loans and receivables which are non derivative financial assets with fixed or determinable payments that are not quoted
in an active market. Loans and receivables are subsequently measured at amortized cost using the effective interest
rate method, less impairment.
Accounts receivable are carried at original invoice amount less an allowance made for doubtful accounts based on areview of all outstanding amounts at the year-end. Allowances for doubtful accounts are established when there is anobjective indication that the Group will not be able to collect the amounts due. Allowances for doubtful accounts are written off when identified.
Other receivables are measured at amortized cost. The Group assesses at each reporting date whether there is any objective evidence that an asset or group of assets is impaired. Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant difficulties, default or delinquency in interest or principal payments.
The amount of the loss is measured as the difference between the assets' carrying amount and the present value of estimated future cash flows.
2.12 Derivative financial instruments
The Group uses derivative financial instruments to hedge foreign exchange risks of forecasted transactions. Derivative
financial instruments can comprise forward exchange contracts and option-based structures.
Derivative financial instruments are initially measured at fair value and subsequently at fair value through profit and loss.
Any gains and losses arising from changes in fair value on derivatives are taken directly to the income statement whichmeans that the Group does not apply hedge accounting.
Derivative financial instruments are shown as part of other current assets and other current liabilities. In case the maturity
is more than one year, derivative financial instruments are recognized under other noncurrent assets or other noncurrent
liabilities.
2.13 Financial liabilities
Financial liabilities comprise bank loans, payables, accrued expenses and derivative financial instruments at the end of
the period.
All financial liabilities are recognized initially at fair value and, in the case of loans and payables, net of directly attributabletransaction costs.
Financial liabilities that are due within 12 months after the balance sheet date are classified as current liabilities unlessthe Group has an unconditional right to defer settlement of the liability until more than 12 months after the balance sheet
date.
2.14 Leases
In the years under review LEM Group does not hold any finance lease.
Rentals payable under operating leases are charged to the income statement on a straight line basis over the lease term.
2.15 Employee benefits
The Swiss subsidiaries provide a defined benefit plan for employees; the other subsidiaries provide defined contributionplans. In both cases the charges are included in the related periods in the personnel expenses of the various functions
where the employees are located.
Defined benefit plan
The defined benefit obligation is determined annually by a qualified independent actuary. The obligation and costs of pension benefits are determined using the projected unit credit method. Service costs are part of personnel expenses andconsist of current service costs, past service costs and gains/losses from plan settlements. Past service costs are recognized at the earlier of the date when the plan amendment occurs, or when restructuring costs are recognized. They
include plan amendment and curtailment. Gains or losses on settlement of pension benefits are recognized when thesettlement occurs. Net interest is recorded in the financial result and is determined by applying the discount rate to thenet defined benefit liability/asset that exists at the beginning of the year. Actuarial gains and losses resulting from changes
in actuarial assumptions and experience adjustments are recorded in other comprehensive income as remeasurementsof employee benefits. The return on plan assets (excluding interest based on the discount rate) and any change in theeffect of an asset ceiling are also recorded in this line. In accordance with IFRIC 14, any assets resulting from surpluses
in defined benefit plans are limited to the value of the maximum future savings from reduced contributions.
LEM | Annual Report 2015/16

43

Defined contribution plan
The subsidiaries abroad sponsor defined contribution plans based on local practices and regulations.
LEM incentive scheme
The variable compensation consists of a short-term (STI) and a long-term (LTI) incentive components. The STI compensates
for the actual annual results and achieved performance. The LTI is based on the Economic Value Added (EVA) performanceof LEM evaluated over the three previous financial years. Both elements are cash settled and the bonus payments are madein the first four months of the following financial year. The estimated payments are accrued for per year-end.
2.16 Provisions and contingent liabilities
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it isprobable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of theamount of the obligation.
Warranty and customer claims
The Group recognizes the estimated liability to replace products still under warranty at the balance sheet date. This position is calculated based on past history of the level of repairs and replacements. Additional specific provisions are booked
when required.
Litigations and consumption taxes
The Group recognizes the estimated country- and entity-specific risks relating to litigations with former personnel or direct
and indirect taxation.
Restructuring
A constructive obligation to restructure arises only when an entity has a detailed formal plan for the restructuring identifying
at least:– – the business or part of a business concerned;– – the principal locations affected, the location, function, and approximate number of employees who will be compensatedfor terminating their services;– – the expenditures that will be undertaken; and– – when the plan will be implemented;
and raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that planor announcing its main features to those affected by it.
Contingent liabilities
Contingent liabilities arise from past events where the outcome depends on future events. As the probability either cannot be measured reliably or the probability for a subsequent outflow lies below 50%, contingent liabilities are not recognized in the balance sheet but are described in the notes.
2.17 Share capital
LEM Holding SA has only ordinary registered shares. Dividends on ordinary shares are recognized in equity in the period
in which they are declared.
Treasury shares
Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted from equity. Neither
gain nor loss is recognized in the income statement on the purchase, sale, issue or cancellation of the Group's own equity
instruments. Any difference between the carrying amount and the consideration is recognized in retained earnings.

LEM | Annual Report 2015/16

44

2.18 Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue canbe reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.
Revenue from the sale of products comprises all revenues that are derived from sales of products to third parties after deduction of price rebates and value-added tax. Revenues from the sale of products are recognized when the significant risks andrewards of ownership of the goods have passed to the buyer, usually on delivery of the products.
2.19 Income taxes and deferred taxation
Income taxes
Income taxes comprise all current and deferred income taxes, including the withholding tax payable on profit distributions
within the Group. Income taxes are recognized in the consolidated income statement except for income taxes on transactions that are recognized directly in shareholders' equity or in other comprehensive income.
Deferred taxation
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax baseof assets and liabilities and their carrying amounts in the financial statements. Deferred taxes are determined using tax
rates that apply, or have been substantially enacted, on the balance sheet date in the countries where the Group is active.
Tax losses carried forward are recognized as deferred tax assets to the extent that it is probable that tax profit will beavailable in the future against which the tax losses carried forward can be utilized. Deferred tax assets and liabilities areoffset against each other if the corresponding income taxes arise by the same tax authority and a legally enforceable rightfor offsetting exists.

LEM | Annual Report 2015/16

45

3 Segment information
Business segment information
Industry
In CHF thousands

Income statement
Sales
EBITDA
Operating profit
Net financial expenses
Taxes
Net profit for the year
Depreciation and amortization:
Tangible assets
Intangible assets
Impairment loss
Total

Automotive

LEM Group

2015/16

2014/15

2015/16

2014/15

2015/16

2014/15215'151
48'57242'984221'042
55'44949'89246'302
12'130
9'924

36'715
6'052
4'317

261'454
60'70252'908742(10'163)
43'487257'757
61'501
54'209(2'674)(8'404)43'131

4'200
1'092
295
5'588

4'928
629

1'669
66

5'557

1'589
316
302
2'206

1'735

5'789
1'408
597
7'794

6'597
694
0
7'291

5'732
361
6'093

4'713
3'404
8'117

1'152
78
1'230

1'439
565
2'004

6'884
439
7'322

6'151
3'969
10'121

Capital expenditures:
Tangible assets
Intangible assets
Total assets

For management purposes, LEM Group is organized into two operating segments, Industry and Automotive. The Industry segment develops, manufactures and sells electronic components called transducers for the measurement of current
and voltage of various industrial applications. The Automotive segment develops, manufactures and sells transducers forapplications in automotive markets.
Transactions between the subsidiaries and/or business segments are conducted at arm's length.
Geographical information
China

USA

Germany

Japan

Italy

Switzerland

Rest of the world

LEM Group

In CHF thousands

2015/16 2014/15 2015/16 2014/15 2015/16 2014/15 2015/16 2014/15 2015/16 2014/15 2015/16 2014/15 2015/16 2014/15 2015/16 2014/15

Sales

81'53567'61942'94440'96731'53234'34421'73326'16913'82914'501

2'973

2'565

66'90871'593 261'454 257'757

Noncurrent assets

8'980

12'367

43

51

285

152

3'557

3'354

49

10

15'07915'589

4'816

3'083

Sales are reported as per place of transaction.

LEM | Annual Report 2015/16

46

32'80934'606

4 Accounts receivable
In CHF thousands

31.3.201631.3.2015

Accounts receivable – trade
Allowance for doubtful accounts
Total accounts receivable – trade
Other receivables
Total

50'830(1'187)49'643
6'253
55'89647'451(777)
46'674
3'452
50'126

2015/16

2014/15

777

1'314

491
(12)
(56)
(13)
1'187

(560)
(30)

Movements of allowance for doubtful accounts
In CHF thousands

Opening position
Additions charged/(reversals credited) to income statement
Amounts written off
Other movements
Foreign exchange effect
Total

52
777

Aging analysis of accounts receivable
In CHF thousands

31 March 2015
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total
31 March 2016
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

Not due<30 days

31–90 days

91–180 days

>180 days

Total

30'724

12'611

562
(147)

3'373
34'097

7
12'619

3'064
(161)
31
2'934

490
(469)
40
61

47'451(777)
3'452
50'12639'286

5'745

1'009
(252)

6'167
45'453

13
5'757

3'965
(196)
2
3'771

825
(739)
71
158

50'830(1'187)
6'253
55'896415

757

The allowance for doubtful accounts is computed as a percentage of aged balances plus an assessment of individual
recoverability. It corresponds to 2.3% of trade accounts receivable (1.6% in 2014/15). In 2015/16, no receivables havebeen individually impaired.
5 Inventories
In CHF thousands

31.3.201631.3.2015

Raw materialWork in progress
Finished goods and goods for resale
Total

11'548
1'706
14'54227'79612'001
1'177
14'367
27'545The inventories include allowances of CHF 2'528 thousand (2014/15 CHF 2'882 thousand).

LEM | Annual Report 2015/16

47

6 Other current assets
In CHF thousands

Advances to suppliers
Prepayments and accrued income
Derivative financial instruments
Other current assets
Total

31.3.201631.3.2015

419
1'296
0
24
1'739

634
1'348
342
14
2'338

Machinery andequipment

Total

25'180
1'031
6'152
(38)
(6'597)25'728For further information on derivative financial instruments, see note 23.
7 Property, plant and equipment
In CHF thousands

Land and buildings

Net book value 1 April 2014
Foreign exchange effectInvestment
Disposal
Depreciation charge for the year
Net book value 31 March 2015

126
(7)

(14)
105

25'054
1'038
6'152
(38)
(6'582)25'623

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2015

328
(223)
105

82'780(57'157)
25'623

83'108(57'380)
25'728Net book value 1 April 2015
Foreign exchange effectInvestment
Disposal
Impairment loss
Depreciation charge for the year
Net book value 31 March 2016

105
6

(14)
97

25'623
(652)
6'884
(760)
(238)
(5'775)25'08225'728
(646)
6'884
(760)
(238)
(5'789)25'179At cost of acquisition
Accumulated depreciation
Net book value 31 March 2016

348
(251)
97

82'881(57'799)
25'082

83'229(58'050)
25'179LEM Group owns for its Automotive segment some equipments and machines which will have very limited production
volume in the future. This was an indication for the Group to perform an impairment test during 2015/16. The recoverable
amounts of the equipments and machines have been determined based on a value-in-use calculation using cash flow
projections from management estimates. The pre-tax discount rate applied to the cash flow projections was 9.9%. As aresult of the analysis, management had recognized an impairment loss of CHF 238 thousand against the value of themachines previously carried at CHF 431 thousand, which was recorded in cost of goods sold.

LEM | Annual Report 2015/16

48

8 Intangible assets
In CHF thousands

Goodwill

Patents

Other intangible assets

Total

Net book value 1 April 2014
Foreign exchange effectInvestment
DisposalAmortization charge for the year
Net book value 31 March 2015

3'136
(127)

330

(330)
0

2'289
(15)
3'969
(10)
(364)
5'869

5'755
(142)
3'969
(10)
(694)
8'878

4'950
(4'950)(0)

9'534(3'665)
5'869

17'493(8'615)
8'878

(0)

5'869

2

(57)
324

437
(8)
(379)
(359)
(1'351)
4'208

8'878
89
439
(8)
(359)
(1'408)
7'630

5'331
(5'007)324

9'407(5'199)4'208

17'837(10'206)
7'630

At cost of acquisition
Accumulated amortization
Net book value 31 March 2015

3'009
3'009
3'009

Net book value 1 April 2015
Foreign exchange effectInvestment
Disposal
Transfer movement
Impairment loss
Amortization charge for the year
Net book value 31 March 2016

3'009
89

At cost of acquisition
Accumulated amortization
Net book value 31 March 2016

3'098

379

3'098

3'098

In 2014/15 increase in the intangible assets was mainly explained by the capitalization of costs related to the implementation of the new ERP. The cumulative investment amounts to CHF 4.5 million as of 31 March 2016 and started to beamortized as per 1 April 2015. This represented a depreciation charge of CHF 0.9 million. An additional impairment of
CHF 0.4 million was recognized to reflect the nonutilization of one ERP module due to internal reorganization.
The entire goodwill of LEM Group is from the acquisition of NANA in 2000/01 and is allocated to the cash-generating unit
LEM Japan KK. The goodwill relates to the Industry segment. The recoverable amount has been determined based onvalue-in-use calculations. These calculations use cash flow projections of five years based on financial business plans
and budgets approved by management. The projections include assumptions concerning revenue growth and expected
operating costs. Average revenue growth is projected at 5% and operating costs were estimated based on the experience of management. The pretax discount rate used within these cash flow calculations is 7.0% (7.1% in 2014/15) and isbased on the weighted average cost of capital of a peer group. The carrying value of the cash-generating unit including
goodwill was compared to the value in use and no impairment was found for the year ended 31 March 2016.
9 Accounts payable
In CHF thousands

31.3.201631.3.2015

Total accounts payable – trade
Other payables
Total

17'374
3'927
21'301

10'587
1'425
12'012

Accounts payable are back to a normal level. As a reminder, LEM proceeded to early payments of its suppliers per endof March 2015, in anticipation of the go-live of the Enterprise Resource Planning (ERP) software.

LEM | Annual Report 2015/16

49

10 Provisions
Warranty andcustomer claims

Litigations andconsumption taxes

Balance as per 1 April 2014
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effectBalance as per 31 March 2015
Of which current
Of which noncurrent

2'468
1'478
(727)
(854)
6
2'371

910
208
(332)
(24)
23
785

Balance as per 1 April 2015
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effectBalance as per 31 March 2016
Of which current
Of which noncurrent

2'371
1'542
(731)
(613)
(37)
2'532

785
53
(160)
(118)
(21)
538

In CHF thousands

Restructuring

Total

579

3'957
1'686
(1'059)(1'244)
15
3'355
1'501
1'854

(366)
(14)
199

199
445
(197)
447

3'355
2'040
(891)
(928)
(58)
3'517
1'552
1'965

Warranty and customer claims
Provisions for warranty and customer claims have been estimated based on past experience and the risk assessment ofmanagement. The warranty provision is expected to be used over the next five years.
Litigations and consumption taxes
Despite the care that LEM applies in the separation process with personnel, such separation may result in legal conflicts.
The Group will defend its case and management estimates the reasonable risk to be provided for.
The Company operates in multiple jurisdictions with complex legal and tax regulatory environments. In the frame of thecontinuous improvement of its processes and systems, LEM has reviewed the consumption taxes in several countries. It
has appeared that some LEM's subsidiaries may not have been fully compliant with their local consumption tax regulations. As a consequence, LEM has estimated consumption tax provisions according to management best judgment. Someof these positions are inherently uncertain and include the interpretation of local regulations applied to complex transactions.
Transfer of activity
As a continuation of a strategy initiated in 2004, LEM continues to relocate production lines from the plants in Machida,
Japan, and Geneva, Switzerland, to low-cost countries. The operations in Japan are significantly reduced and concentrated on the local Japanese market. In Switzerland, the operations are being progressively reduced and focusedon high-complexity / high-precision products for worldwide markets. In parallel, LEM's site in Switzerland is being
reinforced with continued investment in R&D and marketing.
A provision had been constituted in 2012/13 in relation with the above-mentioned relocations of activity. Since 2013/14,
LEM transferred a part of the production lines from Geneva, Switzerland, and from Machida, Japan, to Sofia, Bulgaria,
and Beijing, China and fully used the before-mentioned provisions as of 31 March 2016. An additional provision of CHF 445
thousand was set-up during 2015/16.

LEM | Annual Report 2015/16

50

11 Other liabilities
In CHF thousands

Post-employment benefit plans
Derivative financial instruments
Other liabilities
Total
Of which current
Of which noncurrent

31.3.201631.3.2015

4'706
94
1'215
6'015
593
5'422

2'449
0
682
3'131
466
2'665

The increase of the post-employment benefit plan liability is linked to the decrease of the discount rate assumption, as
elaborated in note 20.
Other liabilities increase is mainly due to the increase of the accrual for long-term incentive plan recognized on a 3 years
plan.
12 Equity
Share capital
The nominal share capital of CHF 570'000 comprises 1'140'000 registered shares, each with a nominal value of CHF 0.50.
There is neither authorized nor conditional share capital outstanding.
Investments in shares of LEM Holding SA held by the Group are classified as treasury shares and are accounted for at
historical cost. Treasury shares are not entitled to dividends.
Movement of treasury shares
In number of shares, in CHF

Number of shares

Average purchasepriceTotal in CHF
thousands

Balance 1 April 2014
Movement
Balance 31 March 2015
Ordinary dividend per share

1'084
(719)
365
40.00

687.38642.54775.72

745
(462)
283

Balance 1 April 2015
Movement
Balance 31 March 2016
Ordinary dividend per share

365
297
662
35.00

775.72736.60758.17

283
219
502

The dividend to be paid will be proposed by the Board of Directors to the ordinary General Meeting of the Shareholders of
the Group on 30 June 2016. The expected payout for dividends amounts to CHF 39'877 thousand.

LEM | Annual Report 2015/16

51

13 Staff cost
In CHF thousands

Notes

2015/16

2014/15

Production
Sales
Administration
Research and development
Total(23'416)(18'035)(13'880)(10'512)(65'843)(23'035)(17'126)(12'713)(10'399)(63'272)

Salaries and wages
Temporary employee costs
Cost of defined benefit plans
Cost of defined benefit contribution
Total(60'127)(2'784)(2'693)(239)(65'843)(57'939)(2'977)(2'114)(243)(63'272)

31.3.201631.3.2015

1'253
121
13
1'388

1'182
81
12
1'274

Number of employees at the end of the financial year
Permanent employees
Temporary employees
Apprentices
Total

20.1

The increase of salaries and wages is mainly due to the reorganization costs (cf compensation report and note 10 on provisions)and the higher number of permanent employees.
14 Financial expense
In CHF thousands

Interest expenses
Other financial expenses
Total

31.3.201631.3.2015

(304)
(57)
(361)

(146)
(104)
(251)

31.3.201631.3.2015

116
116

199
199

31.3.201631.3.2015

2'195
(436)
(772)
987

(2'536)(134)
49(2'622)15 Financial income
In CHF thousands

Interest income on cash
Total
16 Exchange effect
In CHF thousands

Exchange gains/(losses)
Fair value revaluation on derivatives
Gains/(losses) on derivative 1
Total
1

Position includes cost of derivative hedging.

The 2015/16 exchange effect is mainly driven by the appreciation of the EUR while last year LEM was facing the EUR
devaluation versus the CHF.

LEM | Annual Report 2015/16

52

17 Income taxes, deferred tax assets and liabilities
The Group operates in multiple jurisdictions with complex legal and tax regulatory environments. In certain of these jurisdictions, the Group has taken income tax positions that management believes are supportable and are intended to withstand challenge by tax authorities. Some of these positions are inherently uncertain and include those relating to transfer
pricing matters and the interpretation of income tax laws applied to complex transactions. The Company periodicallyreassesses its tax positions. Changes to the financial statement recognition, measurement, and disclosure of tax positions are based on management's best judgment given any changes in the facts, circumstances, information available
and applicable tax laws. Considering all available information and the history of resolving income tax uncertainties, theGroup believes that the ultimate resolution of such matters will not have a material effect on its financial statements.
Differences between the final tax outcome and the amounts that were initially recorded impact the income and deferredtaxes in the period in which such determinations are made. The Group calculates its expected average tax rate as aweighted average of the tax rates in the tax jurisdictions in which the Group operates.
LEM has taken the decision to repatriate all available dividends from its subsidiaries in the foreseeable future. Unrecoverable withholding taxes are considered part of the expected tax rate. Deferred income tax liabilities have been established
for unrecoverable withholding taxes that would be payable on the unremitted earnings of foreign subsidiaries. Given thatthe new double taxation agreement between China and Switzerland reducing the withholding tax rate from 10% to 5%
has been formally enacted as per 15 November 2014, the Group has applied the rate for the fiscal year 2014/15.
In CHF thousands

Current income taxes
Deferred taxes relating to the origination and reversal of temporary differences
Deferred tax income resulting from changes in tax rates
Adjustment recognized in the period for current tax of prior year
Total

2015/16

2014/15(12'150)
1'457(8'849)228(7)224(8'404)530(10'163)

The tax (expense)/income relating to components of other comprehensive income amounts to CHF 190 thousand for theyear 2015/16 (CHF 1'092 thousand in 2014/15).
The Group's effective tax rate differs from the Group's average expected tax rate as follows:In %2015/16

2014/15

Group's average expected income tax rate
Group's average expected ­w ithholding tax rate
Group's average expected tax rate

17.8
1.6
19.3

17.6
0.8
18.4

Tax effect of– – permanent differences– – effect of changes in tax rates on deferred taxes– – adjustment in respect of previous periods' income tax– – other differences
Group's effective tax rate

0.3
0.1
(1.0)
0.2
18.9

0.5
(2.4)
(0.4)
0.2
16.3

In 2014/15, the revaluation of the Chinese withholding tax positions from 10% to 5% had a positive impact on the one-off
effects of 2.4%pts.

LEM | Annual Report 2015/16

53

Deferred tax assets and liabilities
Deferred taxes have been calculated on the following balance sheet positions:31.3.2016
In CHF thousands– – Accounts receivable– – Inventories– – Property, plant and equipment– – Intangible assets– – Other financial assets– – Tax losses carried forward– – Other assets– – Provisions– – Others– – Withholding tax on dividends
Gross deferred taxes

31.3.2015

Asset

Liability

Asset

Liability

92
1'090
1'442
507
999
875
3
399
753

(13)
(169)
(11)
(478)

118
934
1'780
860
652
34
1
514
847

(292)
(648)
(42)
(458)
(218)

6'160

(151)
(33)
(1'725)(2'578)

5'740

(54)
(1'869)(3'581)LEM Group has CHF 875 thousand (CHF 34 thousands in 2014/15) of deferred tax asset on tax losses. The Group
expects that the concerned subsidiaries will have sufficient future taxable profit available against which the tax losses
can be utilized to support the recognition of the losses as deferred tax assets. On this basis, the Group has determinedthat it can fully recognize these deferred tax assets.
The balance sheet contains the following:

2015/16

2014/15– – Deferred tax assets

5'636

4'418

– – Deferred tax liabilities
Net assets(2'054)
3'582(2'259)2'159

2015/16

2014/15

43'487

43'1311'140'000
1'140'000
1'065
1'138'935
38.18

1'140'000
1'140'000
923
1'139'077
37.86

There were no unrecorded losses carried forward at 31.3.2016, nor at 31.3.2015.
18 Earnings per share

Basic and diluted earnings per share
Net profit for the year attributable to LEM shareholders – in CHF thousands
Ordinary number of shares at the beginning of the year
Weighted average number of ordinary shares
Weighted average number of treasury shares
Weighted average number of shares outstanding
Earnings per share – basic and diluted in CHF

19 Related parties
Related parties are the Board of Directors and the Executive Managers as defined in the Corporate Governance guidelines. The compensation to the Board of Directors is paid as a fixed fee in cash. The compensation for the Executive
Management includes base salary, a performance-related bonus and post-employment benefits. Bonus payments are
effected in cash.
In the financial year 2015/16 the former members of the Executive Management who left the Company received after
their departure from the Executive Management payments in the amount of CHF 651'000, including compensation for
their non-compete obligation. In 2014/15, no such benefit was paid.

LEM | Annual Report 2015/16

54

Compensation of the Board of Directors
In CHF thousands

2015/16

2014/15

Base salary
Additional fees
Total

(750)

(790)

(750)

(790)

In CHF thousands

2015/16

2014/15

Base salary
Bonus
Post-employment benefits
Total(1'603)(1'238)(251)(3'093)(1'886)(1'120)(190)(3'196)Compensation of the Executive Management

Servotronix Motion Control Ltd, a company presided by Ilan Cohen, has bought transducers for CHF 662 thousand in
2015/16 (CHF 609 thousand in 2014/15), including purchases done by its subsidiaries and subcontractors, from LEM
Group at market price. No other member of the Board of Directors has any significant business connection with LEM
Group.
For details on the compensation of the Board of Directors and of the Executive Management, please refer to note 10 in
the notes to the financial statements of LEM Holding SA. Also, see accounting policies 2.15 Employee benefits and note
2.16 Provisions and contingent liabilities and the Compensation Report.
20 Retirement benefit obligations
The Group operates a defined contribution plan for all its employees in Switzerland with a collective foundation.
This foundation is a separate legal entity which is not part of the Group. It is managed by a board having equal representation of employees and employers of the affiliated companies. It is supervised by the supervisory authority and complies
with the requirements of Swiss pension law. According to Swiss law, the pension plan is considered as a defined contribution plan whereas it is considered as a defined benefit plan under IAS 19 due to the various benefit guarantees includedin the laws.
The plan is funded by contributions from both employer and employees.
The plan participants are insured against the financial consequences of retirement, disability and death. The retirement
benefit is based on a notional individual savings account converted at retirement into a pension.
The assets of the foundation are invested into a diversified portfolio. Death in service and disability benefits are insured
with an insurance company. The pension plan does not expose the affiliated companies to any additional unusual risks.
No curtailments or settlements occurred in 2015/16.
In view of the low-interest environment, the discount rate used for the evaluation of LEM's pension obligations has been
reduced from 0.9% to 0.5%, thereby increasing the obligations by CHF 6.0 million. The plan assets showed an increaseby CHF 3.7 million. As a result, the overall-funded status reduced by CHF 2.3 million, from a liability of CHF 2.1 million to
CHF 4.4 million. In application of IAS 19, this adjustment was accounted for in other comprehensive income and did not
impact the net profit for the year.
The subsidiaries abroad sponsor defined contribution plans based on local practices and regulations.
In CHF thousands

31.3.201631.3.2015

Fair value of plan assets at year-end
Defined benefit obligations at year-end
Funded status (net liabilities in the balance sheet)

46'29850'657(4'359)42'56444'661(2'098)LEM expects to contribute CHF 2'114 thousand to its defined benefit plan in 2016/17.

LEM | Annual Report 2015/16

55

20.1 Cost of defined benefit plans
Cost of defined benefit plans
In CHF thousands

Current service cost
Net interest (income)/cost
Total pension expenses recorded in consolidated income statement

31.3.201631.3.2015

2'693
19
2'712

2'114
(88)
2'026

Costs related to the pension plan were charged to the different functional departments based on salary costs.
20.2 Remeasurements of employee benefits
Remeasurements of employee benefits
In CHF thousands

31.3.201631.3.2015

1'615
(661)
952

8'310
(3'214)
5'096

In CHF thousands

31.3.201631.3.2015

Fair value of plan assets per beginning of year
Return on plan assets excluding interest income
Interest income on plan assets
Employer's contributions
Employees' contributions
Benefits paid
Fair value of plan assets per end of year

42'564
661
383
1'405
1'887
(602)
46'29837'173
3'214
743
605
1'663
(834)
42'564

In CHF thousands

31.3.201631.3.2015

Defined benefit obligation per beginning of year
Current service cost
Employees' contributions
Interest costExperience adjustments on obligation
due to assumption changes
due to population changes
Benefits paid
Defined benefit obligation per end of year

44'661
2'693
1'887
402
1'615
3'129
(1'514)(602)
50'65732'755
2'114
1'662
655
8'309
5'765
2'544
(834)
44'661

Experience adjustments on defined benefit obligation
Return on plan assets excluding interest
Total remeasurements recorded in other comprehensive income
20.3 Change in fair value of plan assets
Change in fair value of plan assets

20.4 Change in present value of defined benefit obligation
Change in present value of defined benefit obligation

The weighted average duration of the Defined Benefit Obligation (DBO) at the end of the current fiscal year is 26 years.

LEM | Annual Report 2015/16

56

20.5 Asset allocation of investments
Major categories of plan assets as a percentage of the fair value of total plan assets
In %Equity securities
Debt securities
Real estate
Cash and other investments

Long-term target

2015/16

2014/15

30.0%
29.0%
25.0%
16.0%

32.0%
29.5%
24.0%
14.5%

34.0%
29.3%
24.3%
12.4%

100.0%

100.0%

100.0%

Strategic pension plan allocations are determined by the objective to achieve a return on investment, which, together
with the contribution paid, is sufficient to maintain reasonable control over the various funding risks of the plans. Estimated returns on assets are determined based on the asset allocation and are reviewed periodically. A temporary deviation from policy targets is allowed.
Cash as well as most equity and debt securities have a quoted market price in an active market. Other assets including
real estate and other investments do not have a quoted market price.
20.6 Actuarial assumptions
In %2015/16

2014/15

Discount rate
Salary increases

0.50%
0.50%

0.90%
1.00%

The present value of the defined benefit obligation is determined annually by independent actuaries using the projected
unit credit method. Actuarial assumptions are required for this purpose.
Sensitivities of significant actuarial assumptions
The sensitivity analysis is based on reasonable possible changes as of the end of the year 2015/16. Each change in asignificant assumption was analyzed separately as part of the test.
The sensitivity of the DBO to changes in the main actuarial assumptions is as follows:
DBO increase/DBO (decrease) – In CHF thousands

Discount rate
Increase by 0.25%
Decrease by 0.25%
Salary increase rate
Increase by 0.25%
Decrease by 0.25%

2015/16

2014/15(2'738)2'953(1'696)
1'748

265
(355)

514
(499)

LEM | Annual Report 2015/16

57

20.7 Maturity structure of pension obligation
The following main cash outflows are expected in future periods:
In CHF thousandsin 1 yearin 2 years
in 3 years
in 4 years
in 5 years
in 6 to 10 years

962
970
1'059
1'147
1'209
7'927

21 Operating lease commitments
Minimal lease payments are payable as follows:
In CHF thousands

31.3.201631.3.2015

Within 1 year
Between 1 and 5 years
Beyond 5 years
Total

4'850
12'298574
17'722

4'616
15'927
1'492
22'035

In 2015/16 lease expenses amounted to CHF 5'084 thousand (2014/15 CHF 4'839 thousand). Lease agreements exist
for the business facilities used by the Group companies. The agreements are classified as operating leases. The leases
have varying terms and renewal rights between one and fifteen years.
22 Contingent liabilities
The French customs authorities have audited LEM International SA for the period from 27 March 2011 to 31 March 2015,
and did not identify any wrong doings in respect of the customs and duties paid. However they question the validity of
the applied VAT exemption (so-called régime 42) for goods sold from Switzerland to EU customers, transiting throughFrance. LEM International SA has received an official notice from the customs authorities during Q4 2015/16 demanding
to pay the value-added tax for that period, amounting to a total of EUR 15.4 million If LEM International SA decides topay, those VAT taxes should be recoverable.
LEM International SA and two renowned external legal counsels firmly disagree with the conclusions rendered by the local
customs authorities. In case of the customs authorities upholding their position, LEM International SA will consider to go
to court to defend its position. The whole legal dispute is expected to last several years.
23 Financial risk management objectives and policies
The group classifies its financial assets and liabilities into the following categories as per IFRS 7:
Financial assets
In CHF thousands

Cash and cash equivalents
Accounts receivable
Derivative financial instruments –current
Other current financial assets
Other noncurrent financial assets
Total

LEM | Annual Report 2015/16

58

31.3.2016
Fair value

31.3.2015
Fair value

Loans andreceivables

13'62955'8960

20'92050'126
342

X
X

24
979
70'52814889
72'291

X
X

At fair value throughprofit and loss

XFinancial liabilities
In CHF thousands

Accounts payable
Accrued expenses
Derivative financial instruments –current
Other current financial liabilities
Other noncurrent financial
liabilities
Total

31.3.2016
Fair value

31.3.2015
Fair value

Loans andreceivables

21'301
18'23094

12'012
18'688
0

X
X

65
40

27
16

X
X

39'73130'743

At fair value throughprofit and loss

X

The management assessed that fair value level of cash and cash equivalents, accounts receivables, other current andnoncurrent assets, accounts payables, accrued expenses and other current and noncurrent liabilities that are not measured at fair value approximate their carrying amounts in view of their short-term nature and are consequently not separately disclosed.
The Group enters into derivative transactions such as currency risk reversal and forward contracts to hedge the USD and
EUR risks.
The purpose of these currency hedges is to manage the currency risks arising from the Group's operations.
It is the Group's policy that no derivatives for speculative purposes shall be entered into.
The main risks arising from the Group's financial instruments are foreign currency risks and credit risks, whereas the others are of minor or no impact.
The Board of Directors reviews and agrees policies for managing each of those risks.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly(i.e., as prices) or indirectly (i.e., derived from prices).
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
The Group's financial liabilities at fair value amount to CHF 94 thousand per 31.3.2016 (financial asset of CHF 342 thousand per 31.3.2015), all classified under level 2.
During the two last reporting periods, there were no transfers between Level 1 and Level 2 fair value measurements, andno transfers into and out of Level 3 fair value measurements.
Foreign currency risk
The Group operates globally and is exposed to various foreign exchange risks primarily to the USD, EUR, JPY, CNY and GBP.
The Group seeks to reduce those risks by optimizing its natural hedging (cash inflows and outflows in a specific currency should
be in balance as far as possible).
The Group's policy states that 100% of LEM's net exposure for the main currencies EUR and USD is to be hedged on a rolling
12-month basis for EUR and USD.
Currency risks also arise from translation differences that are not hedged by the Group when preparing the consolidated financial statements in CHF. The foreign exchange translation is excluded from the calculation of the sensitivity analysis for currency
risk below.

LEM | Annual Report 2015/16

59

Sensitivity analysis for currency risk
The sensitivity analysis is performed per 31.3.2016 with a 5% change in the USD, EUR, JPY, CNY and GBP with all othervariables held constant of the Group's profit before tax (due to the changes in the fair value of the monetary assets andliabilities) and the Group's equity.
The sensitivity analysis performed for the financial year shows an impact of CHF ±820 thousand for a ±5% EUR ratechange (CHF ±587 thousand per 31.3.2015), of CHF ±509 thousand for a ±5% USD rate change (CHF ±646 thousand
per 31.3.2015), of CHF ±681 thousand for a ±5% CNY rate change (CHF ±742 thousand per 31.3.2015) and of CHF ±273
thousand for a ±5% JPY rate change (CHF ±269 thousand per 31.3.2015). For other currencies, there is no significant
impact. There is no significant impact on the Group's equity.
Credit risk
Credit risk is the risk that a financial loss occurs if a counterparty is unable or unwilling to fulfill its contractual payment
obligation.
The Group trades with recognized and creditworthy parties. The accounts receivable are monitored on a monthly basis.
It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures.
In case of a deterioration of the credit history, advance payments are required.
The Group's exposure to bad debts is not significant. The maximum exposure is the carrying amount as disclosed in note 4.
There are no significant concentrations of risk within the Group.
With respect to credit risk arising from the other financial assets in the Group, which comprises cash and cash equiv­
alents, other current assets and certain derivative instruments, the Group's exposure to credit risks arises from defaultof the counterparty, with a maximum exposure equal to the carrying amount of these positions.
Liquidity risk
The Group operates a cash-pooling agreement in which cash targets are set for all the subsidiaries. Cash surplus / shortages are balanced in intercompany loans on a monthly basis.
Group capital requirements are managed centrally by corporate finance. In case liquidity is required a bank loan is either
done centrally and passed on as an intercompany loan, or given directly by the bank to the subsidiary with a reduction of
the Group's total credit line.
The total leverage of the Group is low, the financial liabilities mature in less than one year based on the carrying value ofborrowings reflected in the financial statements.
Financial liabilities
In CHF thousands

Accounts payable
Accrued expenses
Derivative financial instruments –current
Other current financial liabilities
Other noncurrent financial liabilities
Total

31.3.2016
Fair valueLess than
one year

21'301
18'23094

21'301
18'23094

65
40
39'73165
39'690Over one
year

40
40

31.3.2015
Fair valueLess than
one year

12'012
18'6880

12'012
18'68827
16
30'74327
30'727

Over one
year

16
16

Interest rate risk
The Group's exposure to the risk of changes in market interest rates with the current financial leverage is very low. Per
31.3.2016, there is no bank loan.
Capital management
The primary objective of the Group's capital management is to ensure that it maintains a healthy and stable equity ratio
in order to secure the confidence of shareholders and investors, creditors and other market players and to strengthen
the future development of the Group's business activities.
The Group manages its capital structure and makes adjustments to it, in light of changes in the economic conditions.
LEM targets a payout ratio significantly above 50% of the consolidated net profit for the year.
However, it may diverge from this policy due to economic prospects or on the grounds of planned future investment
activities.

LEM | Annual Report 2015/16

60

24 Scope of consolidation
Full consolidation

Country

Currency

Share capital

Ownership

EuropeLEM Europe GmbHLEM Holding SA
LEM International SA
LEM Intellectual Property SA
LEM Switzerland SA
LEM Bulgaria EOOD
LEM Russia Ltd
LEM Management Services SARL

Germany
Switzerland
Switzerland
Switzerland
Switzerland
Bulgaria
RussiaSwitzerland

EUR
CHF
CHF
CHF
CHF
BGN
RUB
CHF

75'000570'000
100'000
300'000
1'000'000
1'971'830
16'400'000
20'000

100%
100%
100%
100%
100%
100%
100%
100%

North America
LEM USA Inc.

USA

USD

150'000

100%

Asia
LEM Electronics (China) Co. Ltd
LEM Japan KK

China
Japan

CNY
JPY

53'153'194
16'000'000

100%
100%

25 Changes in scope of consolidation
In 2014/15, the Group finalized the conversion with the absorption of LEM France and LEM Belgium into LEM DeutschlandGmbH:– – On 2 February 2015, LEM France Sàrl was merged into LEM Deutschland GmbH.
– – On 2 February 2015, LEM Belgium Sàrl was merged into LEM Deutschland GmbH.
In 2015/16, LEM Deutschland GmbH changed its name to LEM Europe GmbH.
26 Events after the balance sheet date
There were no events subsequent to the balance sheet date that require adjustment to or disclosure in the financial statements.

LEM | Annual Report 2015/16

61

Auditor's Report
Report of the statutory auditor on the consolidated financial statements
As statutory auditor, we have audited the consolidated financial statements of LEM Holding SA, which comprise the statement of financial position, income statement, cash flow statement, statement of comprehensive income, statement ofchanges in equity and notes (pages 35 to 61), for the year ended 31 March 2016.
Board of Directors' responsibility
The Board of Directors is responsible for the preparation of these consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable inthe circumstances.
Auditor's responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted
our audit in accordance with Swiss law, Swiss Auditing Standards and International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers the internal control system relevant to the entity's preparation of the consolidated
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well
as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements for the year ended 31 March 2016 give a true and fair view of thefinancial position, the results of operations and the cash flows in accordance with IFRS and comply with Swiss law.
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal
control system exists, which has been designed for the preparation of consolidated financial statements according to the
instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
Lancy, 26 May 2016
Ernst & Young Ltd

Arthur Bergmann
Licensed audit expert(Auditor in charge)

LEM | Annual Report 2015/16

Karine Badertscher Chamoso
Licensed audit expert

62

LEM Holding SA
Financial Statements

Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . 66
Proposed Appropriation of Available Earnings . . . . . . .

70

Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71

LEM | Annual Report 2015/16

63

LEM | Annual Report 2015/16

64

Balance Sheet(before distribution of earnings)

AssetsIn CHF thousands

Notes

31.3.201631.3.2015

4'137
30'829456
238
35'660

6'678
18'209731
477
26'096

8'840
45'18354'0238'840
45'18354'02389'68380'11931.3.201631.3.2015

28'61475
1'738
30'42722'99382
1'772
24'8470030'42724'847

570
285
9'153
49'750(502)
59'256570
285
20'35934'340(283)
55'27189'68380'119Current assets
Cash and cash equivalents
Loans to affiliated companies
Current assets from affiliated companies
Other current assets
Total current assets
Noncurrent assets
Loans to affiliated companies
Investments in affiliated companies
Total noncurrent assets

1

Total assets
Liabilities and equity
In CHF thousands

Notes

Current liabilities
Loans from affiliated companies
Current liabilities from affiliated companies
Other current liabilities
Total current liabilities
Other noncurrent liabilities
Total liabilities
EquityShare capital
Legal reserves
Free reserves – balance carried forward– profit for the year
Treasury shares
Total equity
Total liabilities and equity

2

3

LEM | Annual Report 2015/16

65

Income Statement

IncomeIn CHF thousands

Dividend from affiliated companies
Interest income from affiliated companies
Foreign exchange gain
Other financial income
Other income from affiliated companies
Total incomeNotes

2015/16

2014/15

4

48'708
848
2'337
16
5'415
57'32532'593
822
1'215
9
5'258
39'896Notes

2015/16

2014/15

6(3'767)(369)(3'072)(7'209)(2'984)(265)(1'976)(5'226)

50'11634'670(366)
49'750(330)
34'3405

ExpenseIn CHF thousands

Office, administration and personnel expense
Financial expense
Foreign exchange loss
Total expense

5

Profit before taxes
Income taxes
Net profit for the year

7

Notes to the Financial Statements
Principles for the establishment of the financial statements
The accompanying financial statements have been prepared in accordance with the requirements of the Swiss Code ofObligations. Regarding the inclusion of LEM Holding SA in the consolidated financial statements, the accounting andreporting principles described in the notes to the consolidated financial statements apply.
LEM Holding SA does and did not have any employees.
The presentation of the prior year's financial statement was adjusted to conform to the current presentation adapted inaccordance with the new Swiss accounting law.
1 Investments in affiliated companies
In CHF thousands

31.3.201631.3.2015

Historical cost
Total

45'18345'18345'18345'183Par value pershare in CHF

Capital in CHF
thousands

0.50

570
0
570

Refer to note 24 Scope of consolidation of the consolidated financial statements.
The percentage of ownership corresponds to the percentage of voting rights.
2 Share capital
Number of shares

Opening capital 1.4.2015
Change of capital
Closing capital 31.3.2016

LEM | Annual Report 2015/16

1'140'00001'140'000

66

0.50

3 Treasury shares

Value 1.4.2014
ChangeValue 31.3.2015
ChangeValue 31.3.2016

Number of shares

Price pershare in CHF

Value in CHF
thousands

1'084
(719)
365
297
662

687.38642.54775.72736.60758.17

745
(462)
283
219
502

Subsidiaries of LEM Holding SA did not own any shares of LEM Holding SA.
Treasury shares are valued at lower of cost or market value.
4 Dividend from affiliated companies
Last year, LEM Holding SA had delayed the dividend payment from LEM China in light of the expected application of the
new 5% withholding tax rate on dividends. In 2015/16 a dividend of CHF 19'827 thousand was received from LEM China,
generating a withholding tax payment of CHF 991 thousand as mentioned in note 6 Office, administration and personnel
expense below.
5 Exchange effect
In CHF thousands

2015/16

2014/15

Exchange gains/(losses) 1
Fair value revaluation on derivatives 1
Gains/(losses) on derivative 2
Exchange effect

473
(436)
(772)
(735)

(676)
(134)
49
(762)

1 Positions exclude unrealized gains on long-term assets and liabilities, as per Swiss Code of Obligations
2 Position includes cost of derivative hedging.

6 Office, administration and personnel expense
The increase in office, administration and personnel expense is linked to the withholding taxes paid on dividend received
from LEM China.
7 Income taxes
In CHF thousands

2015/16

2014/15

Current taxes
Adjustments of tax provisions of previous periods
Total

(299)
(67)
(366)

(266)
(64)
(330)

LEM | Annual Report 2015/16

67

8 Important shareholders according to article 663c of the Swiss Code of Obligations
On 31 March 2016, the following shareholders held 3% or more of the share capital and voting rights:
In number of shares/options,per cent of shareholding
SharesWerner O. Weber and Ueli
Wampfler, in Zollikon/Wollerau, Switzerland, through
WEMACO Invest AG and
Swisa Holding AG, in Zug/
Cham, Switzerland
Ruth Wertheimer, in Kfar
Shmaryahu, Israel, through7-Industries Holding B.V.,
in Amsterdam, Netherlands
Montanaro AssetManagement Ltd, in London,
United Kingdom
Sarasin Investmentfonds AG,
in Basel, Switzerland
Joraem de Chavonay SA,
Zug, Switzerland
Total shareholders < 3%
Total
N/N = none notified

31.3.2016
Options
PositionIn %Shares

31.3.2015
Options
PositionIn %507'485

20'000527'48546.3%

480'000

30'000510'000

44.7%

141'581

N/N

141'58112.4%

141'581

N/N

141'581

12.4%

57'394

N/N

57'394

5.0%

74'834N/N

74'834

6.6%

42'999N/N

42'9993.8%

59'813

N/N

59'813

5.2%

20'000 (20'000)

0

0.0%

30'000 (30'000)

0

0.0%

370'541
1'140'000

N/N
370'541 32.5%
0 1'140'000 100.0%

353'772
1'140'000

N/N
353'772
31.0%
0 1'140'000 100.0%

N/A – not applicable

9 Guarantees in favor of third parties on behalf of subsidiaries
In CHF thousands

Amount of guarantees issued

31.3.201631.3.2015

1'839

1'834

10 Remuneration of nonexecutive Directors and Executive Management
10.1 Remuneration of nonexecutive Directors
The members of the Board of Directors do not participate in bonus schemes, nor pension funds. The annual salarycompensation is therefore equal to the total compensation.
2015/16
In CHF thousands

Andreas Hürlimann 1, 6, 8
Ilan Cohen 7
Norbert Hess 5
Ulrich Jakob Looser 4
Ueli Wampfler 3
Total

Annual salary

Additional fees

Total compensation

Company's
contribution to socialsecurity charges

290
120
120
100
120
750

0
0
0
0
0
0

290
120
120
100
120
750

18
0
0
9
8
35

2014/15
In CHF thousands

Andreas Hürlimann 1, 4, 7
Peter Rutishauser 2, 5, 8
Ilan Cohen 8
Norbert Hess 6
Ueli Wampfler 3
Total
Chairman of the Board
Vice Chairman of the Board
3
Chairman of the Audit & Risk Committee

Annual salary

Additional fees

Total compensation

Company's
contribution to socialsecurity charges

280
190
100
100
120
790

0
0
0
0
0
0

280
190
100
100
120
790

18
17
0
0
8
42

Member of the Audit & Risk Committee
Chairman of the Nomination & Compensation Committee
6
Member of the Nomination & Compensation Committee

1

4

7

2

5

8

LEM | Annual Report 2015/16

68

Chairman of the Strategy Committee
Member of the Strategy Committee

10.2 Remuneration of Executive Management
2015/16

In CHF thousands

François Gabella, CEO
Executive Management(excl. CEO)
Total Executive
Management

Total
compensation

Company's
contribution tosocialsecurity charges

BasesalaryShort-term
incentive

Long-term
incentive

Company's
contribution topension fund

480
1'123

274
577

203
185

114
137

1'071
2'023

82
158

1'603

850

388

251

3'093

241

Total
compensation

Company's
contribution tosocialsecurity charges

2014/15

In CHF thousands

François Gabella, CEO
Executive Management(excl. CEO)
Total Executive
Management

BasesalaryShort-term
incentive

Long-term
incentive

Company's
contribution topension fund

480
1'406

245
386

192
298

61
129

977
2'219

78
174

1'886

631

490

190

3'196

252

The amounts are shown as follows:– – Base salary: as paid out in the reporting period– – Short-term incentive 2015/16: as proposed to the ordinary General Meeting in June 2016 for payout in July 2016
– – Long-term incentive 2015/16: as accrued for in the reporting period for payout in July 2016
The compensation of former members of the Executive Management staying within the Company after stepping downfrom the Executive Management for their work as Non-Executive Management members are not taken into account in thenumbers above.
Amounts approved by last year's General Assembly:– – Maximum amount base salary (valid from 1 October 2015 to 30 September 2016: CHF 2'800'000)– – Maximum amount long-term incentive 2015/16 for payment in 2017/18: CHF 1'050'000– – Short-term incentive amount 2014/15: CHF 700'000– – Pension fund contribution and company contribution to social security charges: as paid out or accrued for in the reporting
period10.3 Shareholdings
Board of Directors

31.3.201631.3.2015

In number of shares/options

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

Andreas Hürlimann
Peter Rutishauser
Ilan Cohen
Norbert Hess
Ueli Wampfler
Ulrich Jakob Looser
Total

960
N/A
170
0
68'0000
69'130

0
N/A
0
0
0
0
0

793
2'606
170
0
55'000N/A
58'56900
00
10'000N/A
10'000

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

600
0
0
0
600

0
0
0
0
0

400
N/A
N/A
N/A
400

0
0
0
0
0

Executive Management
In number of shares/options

François Gabella, CEO
Andrea Borla, CFO
Frank Rehfeld, SVP Industry
Rainer Bos, SVP Automotive
Total

31.3.201631.3.2015

LEM | Annual Report 2015/16

69

Former members of Executive Management
In number of shares/options

Julius Renk, CFO
Luc Colombel, Vice President, Automotive
Hans-Dieter Huber, Vice President, Industry
Jean-Marc Peccoux, Vice President, R&D and IP
Simon Siggen, Vice President, Operations
Total

31.3.201631.3.2015

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

N/A
N/A
N/A
N/A
N/A
N/A

0
0
0
0
0
0

0
2'100
1'265
1'500
1'100
5'965

0
0
0
0
0
0

Proposed Appropriation of
Available Earnings
Appropriation of available earnings
In CHF thousands

31.3.201631.3.2015

Balance brought forward from previous year
Variation of treasury shares
Net profit for the year
Total available earnings

8'870
(219)
49'75058'401

19'615
462
34'34054'417

Proposal of the Board of Directors:
Ordinary dividend
Balance to be carried forward(39'877)
18'524(45'547)
8'870

The Board of Directors proposes the distribution of an ordinary dividend of CHF 35 per share. Net of 35% withholding
tax, this is an ordinary cash dividend of CHF 22.75 per share.
The proposed appropriation of available earnings is made in compliance with article 671 of the Code of Obligations.
Shares held by LEM Holding SA or any of its subsidiaries are not entitled to dividends.

LEM | Annual Report 2015/16

70

Auditor's Report
Report of the statutory auditor on the financial statements
As statutory auditor, we have audited the financial statements of LEM Holding SA, which comprise the balance sheet,income statement and notes (pages 65 to 70), for the year ended 31 March 2016.
Board of Directors' responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirementsof Swiss law and the company's articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate
accounting policies and making accounting estimates that are reasonable in the circumstances.
Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit inaccordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity's preparation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control system. An audit also includes evaluating the appropriateness of the accounting
policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of thefinancial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
OpinionIn our opinion, the financial statements for the year ended 31 March 2016 comply with Swiss law and the company's
articles of incorporation.
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal
control system exists, which has been designed for the preparation of financial statements according to the instructionsof the Board of Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company's
Articles of Incorporation. We recommend that the financial statements submitted to you be approved.
Lancy, 26 May 2016
Ernst & Young Ltd

Arthur Bergmann
Licensed audit expert(Auditor in charge)

Karine Badertscher Chamoso
Licensed audit expert

LEM | Annual Report 2015/16

71

Information for Investors
Number of registered shareholders

31.3.201631.3.2015

907
72
8
4
991

742
73
8
5
828

31.3.201631.3.2015

49.4
27.0
6.6
0.1
16.9
100.0

52.2
26.6
5.8
0.0
15.3
100.0

1 – 499
500 – 4'999
5'000 – 49'999
50'000 and more
Total

Shareholders by category
In %Institutional shareholders
Private individuals
LEM employees, managers and board
Treasury shares
Nonregistered shares
Total
Share information
SymbolListingNominal value
ISIN
Swiss Security Number (Valor)

LEHN
SIX Swiss Exchange
CHF 0.50
CH0022427626
2'242'762

Share price development LEM Holding SA (LEHN) compared to SPI
900

CHF

800
700
600
500
400
300
200

LEHN

100

SPI

0
2.5.11

2.11.112.5.12

2.11.12Source: Bloomberg

LEM | Annual Report 2015/16

72

2.5.132.11.132.5.142.11.142.5.152.11.15

2.5.16

Share information
In number of shares, CHF

Number of sharesYear high 1
Year low 1
Year-end 1
Average daily trading ­v olume (shares) 1
Earnings per share
Ordinary dividend per share 2
Market capitalization as per 31 March 1 (in CHF millions)
12

2015/16

2014/15

1'140'000
840.00620.50816.50452
38.18
35.00 2929

1'140'000
808.00626.00798.50
586
37.86
40.00
910

Source: SIX
Proposal of the Board of Directors to the ordinary General Meeting of Shareholders on 30 June 2016

Financial calendar of the financial year 1 April 2016 to 31 March 201730 June 2016

5 July 2016
7 July 2016
11 August 2016
10 November 201616 February 2017
1 June 201722 June 201730 June 2017
4 July 2017

Ordinary General Meeting of Shareholders
for the financial year 2015/16
Université de Fribourg, bvd. de Pérolles
Dividend ex-date
Dividend payment date
First quarter results 2016/17
Half-year results 2016/17
Third quarter results 2016/17
Year-end results 2016/17
Ordinary General Meeting of Shareholders
for the financial year 2016/17
Dividend ex-date
Dividend payment dateContactAndrea Borla (CFO)
Phone: +41 22 706 12 50
E-mail: investor@lem.com

LEM | Annual Report 2015/16

73

Group Subsidiaries
LEM is a global player with production plants and development centers in Beijing (China), Geneva (Switzerland), Tokyo (Japan)
and Sofia (Bulgaria). The company has sales offices at all its customers' locations and offers seamless service around the globe.
For a complete list of subsidiaries, offices and representatives, refer to www.lem.com > Contact > Sales Locator
EuropeLEM Holding SA
Avenue Beauregard 1
CH-1700 Fribourg> Andrea Borla

LEM Europe GmbH, Succursale Italia
Via V. Bellini 7
I-35030 Selvazzano Dentro, PD> Tiziano Rossato

LEM Intellectual Property SA
Avenue Beauregard 1
CH-1700 Fribourg> Jean-Marc Peccoux

LEM Europe GmbH, Branch UK
West Lancs Investment Centre
UK-Skelmersdale WN8 9TG> Brian Carter

LEM International SA
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates> Andrea Borla

LEM Bulgaria EOOD
Iliensko Shose 8
BG-1220 Sofia> Boryan Borisov
LEM Russia, LLC
Starickoe Shosse 15
RU-170040 Tver
> Pavel Sobol

LEM Switzerland SA
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates> Simon Siggen
LEM Management Services Sàrl
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates> Martin Hoffmann

LEM Japan KK
2-1-2 Nakamachi
JP-Machida, 194-0021 Tokyo> Takuji Mibae

LEM Europe GmbH
Frankfurter Straße 74
D-64521 Groß-Gerau> Hartmut Graffert
LEM Europe GmbH, Branch Austria
Concorde Business Park 2/F/6
A-2320 Schwechat> Thomas Burda
LEM Europe GmbH, Branch Belgium
Egelantierlaan 2
B-1851 Humbeek> Yves Declerck
LEM Europe GmbH Denmark,Filial af LEM Europe GmbH
Christian X's Alle 168
DK-2800 Kgs. Lyngby> Hartmut Graffert
LEM Europe GmbH, Succursale France
Avenue Galois 15
F-92340 Bourg-la-Reine> Yves Declerck
LEM | Annual Report 2015/16

Asia
LEM Electronics (China) Co. Ltd
Linhe Street 28, Shunyi District
CN-101300 Beijing> Jin Jian74

LEM Management Services Sàrl, Branch India
Level 2, Connaught Place
Bund Garden Road
IN-411 001 Pune
> Sudhir Khandekar
LEM Management Services Sàrl, Branch Korea
Office 2049, Regus Business Center 20F,
Standard Chartered Bldg. 47 Chongro
Chongro-gu
KR-110-702, Seoul> Steve Bae

North America
LEM U.S.A., Inc.
11665 West Bradley Road
USA-Milwaukee, WI 53224> John Marino

Imprint© LEM Holding SA, Fribourg
Concept and text
LEM
Gregor Communications, Zurich
DesignTGG Hafen Senn Stieger, St. Gallen
Images, illustrations
LEM
Pedro Neto
Enol Chen
Jasmin Viertl
Printing
Cavelti, Gossau

LEM Holding SA
Avenue Beauregard 1
CH-1700 Fribourg
Phone: +41 26 460 10 30
Fax: +41 26 460 10 39
www.lem.com
LEM | Annual Report 2015/16

76